Why Invest in a 529 College Savings Plan
You’ve been stuck with a hefty load of student loans from your education to become a PA. Don’t let you children bear that same burden. By saving money in a 529 plan you can invest your savings to be used for qualified college expenses.
Tax Benefits of a 529 Plan
The benefit of saving in a 529 plan versus a regular savings account is that there are tax advantages. Depending on which state you live, you might be able to get a tax deduction or tax credit on your state taxes for contributions. There is typically a limit to how much you can contribute to receive the deduction or credit.
Another tax benefit of the 529 plan is that earnings you will not have to pay taxes on the earning if used on college expenses. For other investment accounts the earnings will be taxed as capital gains.
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Choosing the Best 529 Plan
Most states have at least one 529 plan to choose, which can make choosing the best plan difficult. If your state offers a state tax deduction for using the state plan than in most cases it’s best to use your state 529 plans. Some states, such as California, do not offer a tax benefit for contributing to a 529 plan. If that is the case, you can choose to invest in another states 529 plan.
If your state does not provide a tax benefit for using the in-state 529 plan and you choose to use a different states plan you have many different options and should do your research to find the best plan. Look at the fees and performance of the plans and compare them to other state’s plans. The state plan that you are invested in does not matter for where you use it. You can live in California, invest in the Iowa 529 plan and then use it to attend a college in Florida. The money from a 529 plan can be used to pay for most college costs.
Using a 529 plan is a smart way to save for college as contributions have a tax benefit in most states and earnings are not taxed if used for college expenses. Don’t leave your children without any help for higher education and invest now for their future.
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