529 College Plans: The Inside Scoop529 college plans are state-operated educational investment plans. Some educational institutes are also allowed to operate a specific variant of these plans (529 Prepaid Plan). 529 college plans are specifically designed to help parents save for their childrens future educational costs. These plans are named after the section 529 of Internal Revenue Code. 529 college plans aid families to keep aside assets to fund future college expenses of their children. The expenses may include college fees, books, computers, boarding charges, lodging charges and other such expenditures related to college education. The most important advantage of 529 college plans is that they offer you a number of special tax benefits that you can avail if you fulfill some basic requirements. Some advantages of 529 college plans are as follows: * You get incomparable income tax breaks. Even though your payments are non deductible on the federal tax return, still your money grows tax-deferred. In other words, your tax payment is postponed. However, Earnings are tax free. Pension Protection Act in the year 2006 made this tax-free treatment permanent. In case you withdraw money for some expense not related to college then you have to pay a penalty of 10%. * The control of the accounts operation remains in the hands of the investor himself/herself, quite unlike other traditional methods of investment where the control goes in to the hands of the child after (s)he matures. The beneficiary does not have right to the money in the 529 account. You, the donor, have all the rights. You decide when to withdraw amount, how much to withdraw and for what purpose the money should be used. * It is a very simple and easy to get this plan. All you need to do is to fill an enrollment form and give your investment amount. After that you can relax and forget about future financial problems. The proceedings will be handled by the investment company. * Everybody is entitled to take advantage of the 529 college plans. There are no eligibility conditions to avail benefits from the 529 college plan. The amount you can contribute to this account is extensive. For 529 college plans, there are no salary limitations. Also, there are no age restrictions. There is a false impression that 529 college plans are only for people who wish to send their children to state colleges. This is, however, not true. If you are going in for a 529 savings program, then the entire value of your account can be used to fund college education at any other college across the country. |