It is that time of year again... time to send the kids back to school and time to start thinking about how you want to help you children or grandchildren with their future education costs! There are many different options on how you can save for these expenses and we will discuss below one of the most popular options.
What is the 529?
The 529 is a tax advantaged & completely flexible way to begin savings for your child or grandchild's education.
- You can add up to $15,000 per child ($30,000 if you are married) per year. OR add up to $150,000 at one time by front loading 5 years of contributions into a 529.
- If you are a resident of the state of PA, you are able to claim a state tax deduction for each dollar contributed.
- The account will grow tax deferred, and if you use the funds for an approved education expense, the funds come back out completely tax free.
- You are always the owner of the assets inside of the 529.
- Unlike most tax-advantaged vehicles, there are no IRS imposed income limitations that restrict your contributions to a 529 account.
What can these funds be used for?
529 assets can be used to pay tuition expenses, room & board, books, computers and repayment of student loans. Up to $10,000 per year can also be used for tuition expenses for K-12 education.