Section 529 plans are one of the most popular ways to save for college. Named for a section of the tax code that authorizes them, these plans allow you to invest in pre-paid tuition programs or contribute to tax-favored college savings accounts.
Currently, Section 529 plans are set up by individual states and often managed by professional investment firms.
You don’t get a tax deduction for contributions to these plans but the earnings are allowed to grow tax-free until the funds are withdrawn to pay for qualified education expenses.
Other advantages: You don’t have to invest in your own state’s program. You can shop around to find a plan to meet your needs. And unlike most education tax breaks, there are no income restrictions.
Section 529 plans were first introduced in 1997. But subsequent tax laws made them more attractive with these new provisions:
Qualified withdrawals from a state-sponsored plan are now free from federal tax. In the past, the student had to pay tax on the money when it was withdrawn.
Family members, such as grandparents, can make contributions on behalf of a child. In addition, they can give up to $65,000 to a plan and have the gift spread out over five years for gift tax purposes. Under this provision, the gifts then qualify for the $13,000 annual gift tax exclusion (unchanged from 2011).
Private colleges and universities can now set up their own qualified tuition plans. Originally distributions from these plans were taxable but are now treated as tax-free.
In addition to these new tax law provisions, the IRS has relaxed some of its rules pertaining to Section 529 plans. In the past, one of the disadvantages to contributing was a restriction on changing investments. Let’s say you chose to put your child’s college savings in a volatile stock sector a few years ago. Now, you want to switch to a more conservative investment.
Under the old rules: Participants were able to choose from a selection of investments offered by a program when they signed up but they were not allowed to make any subsequent changes. So in the example above, you’d be stuck with the volatile investment.
Under the new rules: Participants can now change from one investment to another once every 12 months or whenever the beneficiary changes (IRS Notice 2001-55).
With all the changes, Section 529 plans are better than ever. To see if they are right for your family, check with your tax or financial adviser.
About Deborah Laemmerhirt
Let me assist you in finding everything you need to know about buying or selling a home! As the preeminent real estate professional in my community, I am dedicated to providing the finest service available while breaking new ground.
Because the real estate industry is becoming more sophisticated and challenging every day, you need a professional that understands the industry and is positioned to stay ahead of the game.
I go the extra mile to help you achieve your goals. That’s why I constantly research the home, market and estate values so your home is priced effectively from day one. I also make sure the public knows your home is for sale by using innovative marketing techniques to attract potential buyers.
As an Internet-savvy real estate representative in Connecticut, I’ve had the opportunity to help many home buyers find their ideal homes and many sellers obtain top dollar for their homes. Buying or selling a home is one of the largest financial transactions that most people ever undertake, so I will help you through every step of the process. My goal is to make your home selling or buying experience as easy and enjoyable as possible.
My services include:
Explaining the home selling and buying process thoroughly
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Tracking the closing process to ensure a smooth transaction
I welcome the opportunity to address any questions you might have about buying, selling or current market conditions. Please call or e-mail me any time, and I will be happy to discuss your next steps in the buying or selling process.
I specialize in both Residential and Commercial Properties.
I also head a Real Estate Group to provide you with expert service and support.
Areas of Expertise
Making transitions in your life is challenging. You may be moving from out of town, a different state, internationally or just next door! Regardless of the distance I am prepared to respond to your unique needs.If you are a BUYER looking to downsize, up-size, want a new construction, desire a condominium, to invest, even if this is your first home, I will design a unique plan to fulfill your needs in a reasonable time frame, with the best negotiated price and the least amount of inconvenience.For my Home Sellers, I have an innovative marketing plan that will leave nothing to chance. Just call, and I would be happy to share the DIFFERENT and SUCCESSFUL TOOLS I utilize on each of my listings.
I have lived in Connecticut for over 35 years. I practice Real Estate in Fairfield County, New Haven County and Litchfield County. This includes, but is not limited to Bethel, Bridgewater, Brookfield, Danbury, Harwinton, Kent, Litchfield, New Fairfield, New Milford, Newtown, Oxford, Ridgefield, Redding, Roxbury, Sherman, Southbury, Warren, Washington, Westport and Wilton.
