Celebrate 529 Day!

Whether you have babies, toddlers, teenagers, or grandchildren, college costs get more expensive each year.

Many states celebrate May 29 as 529 Day to raise awareness of how 529 plans can help families prepare for higher education expenses. The use of 529 plans has grown in recent years, but there remains a lack of awareness and understanding of the features and tax benefits of using a 529 to help save for the rising cost of education. Named after a section of the federal tax code, a 529 is a flexible, tax-advantaged account designed to help ensure that educational costs are within reach with the proper financial planning.

Advantages - Tax Benefits & Flexibility

Tax-deferred growth – your earnings will be deferred from federal and typically state taxes.

• Tax-free withdrawals – withdrawals are not taxed as long as you use the money for qualified expenses such as tuition, fees, certain room and board expenses, books, supplies, and computer equipment.

• Tax deductions – some states let you deduct your 529 plan contributions on your state income tax return, up to your state’s limit.

• Gift tax benefits – contributions are considered gifts for tax purposes. For 2021, gifts totaling up to $15,000 per individual will qualify for the annual gift tax exclusion. There is also an option to “superfund” a 529 and make up to five years of contributions in one year, for those with significant assets.

• No income limits – unlike Roth IRAs and Coverdell Education Savings accounts, 529s have no income or age limits.

• Owner retains control – different from a custodial account where the child takes control of the assets once the legal age is reached; the named beneficiary has no legal rights to the funds in a 529, and the owner retains control.

• Flexibility - beneficiaries can be changed or transferred to another family member should the original beneficiary not need the funds.

• Expanded use – tax reform law expanded the use of 529s, with the ability to spend up to $10,000 per beneficiary per year on elementary through high school tuition expenses.

Which 529 plan?

It is important to know that you aren’t restricted to investing in your state’s 529 plan and that there is a multitude of options. Though it may make sense to consider your state’s plan, it isn’t always the best choice. The Aevitas Wealth Management team will analyze your particular situation and advise on the plan that best fits your personal circumstances.

How grandparents can help.

Aevitas means generation to generation, and many of our clients embrace leaving a legacy to help ensure the success of the next generations. Numerous grandparents contribute to their grandchildren’s educational savings and take advantage of the benefits noted above. Some choose to open an account and retain ownership, while others contribute to a parent-owned 529 plan. Aevitas can help navigate the options based on your financial and family situation.

Where can I find more information about 529 plans?

Contact Aevitas Wealth Management today to discuss the variables affecting your education savings strategy and pursue your college savings goals. 529 plans are a powerful tool to save for education expenses; let’s talk and establish if this savings strategy is a good fit within the context of your broader portfolio and financial plan.