529 College Accounts For Funding College Expenses
529 college accounts may be one of the most affordable ways to save for your child or grandchild's higher education.
A 529 college account allows you to invest money towards a beneficiary's education while gaining a state tax deduction in many cases and also earning interest and dividends tax deferred. This means that you are able to save for your child's higher education much before he begins his/her college. The 529 account can be used for all sorts of expenditures related to your child's education, such as college tuition fees, books and boarding expenses.
There are two types of 529 College Accounts, though not all states have both. You can choose from a 529 Prepaid Tuition Plan or the 529 Qualified Tuition Plan.
Some of the positive features of 529 college accounts are:
* There are no residency requirements, though you may have tax advantages allowed with certain residencies
* Federal taxes on the income accrued are deferred and in many cases, the state taxes are as well.
* You have many choices where to place your money from very aggressive to very conservative.
* Should the beneficiary choose not to use the funds for higher education, you can change the beneficiary at any time.
* Low administrative fees compared with buying mutual funds on the outside.
* Contribute up to $13,000 per year without incurring federal gift taxes.
* 529 college accounts will not count when financial aid is being computed
While 529 college accounts can be opened at any time, beginning early allows the money to grow over a long period of time.