College Planning

COLLEGE PLANNING

The 2001 tax law brings incredible changes to the world of college saving. The legislation offer more opportunities to save for education by providing greater tax advantages for section 529 savings plans and allowing larger contributions to education savings accounts.

A federal tax-free 529 savings plan may be hard to beat. Its other advantages include no income restrictions on those who contribute and assets that can be used at accredited colleges and universities across the country. These advantages add up to a great way for families to save for college.

Section 529 Savings Plan

A section 529 savings plan is a higher education savings program that provides advantages designed to meet the requirements of a qualified tuition program under section 529 of the Internal Revenue Code.

Contributions made to a Section 529 Savings Plan can be used for tuition, fees, books, room and board, and required supplies and equipment at nearly any accredited institution of higher learning in the United States. Funds can be used for room and board if the student is attending school at least half-time. Some of the features of a 529 Plan include:

  • Investment earnings grow tax-free
  • Qualified distributions are federal income tax-free when used for qualified higher education expenses
  • Participants, usually parents or grandparents, maintain control of the account and distributions
  • No income restrictions on participation
  • Contributions are considered removed from the Participant’s estate
  • Accounts are treated as assets of the Participant, not the Beneficiary, which may favorably impact financial aid qualification (vis-√†-vis a custodial account)
  • Any U.S. resident may participate or be selected as a beneficiary