529 plans are a great way to save away money for kids’ college. But it does take a little bit of time to understand the ins and outs of them. David talks us through the top five things to keep in mind with 529s.
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What are the key things you need to know about when it comes to 529 plans? These are great accounts to save for education for your kids or grandkids. But what are some of the details that often get overlooked?
To start, you’ll want to remember that you get a tax deduction for contributing in many states, including Kansas and Missouri. Regardless of which 529 plan you put money into, Kansas and Missouri will give a tax deduction from your state income tax. So, if you are contributing to plans for your grandparents all over the country, you can deduct a certain amount. David explains how to get this benefit.
While 529 plans are most common for college, there are a few other reasons it can be used as well. In addition to public, private, or community college, it can also be used for grad school and trade school as long as it is eligible for federal student loan funding. Now, up to $10,000 a year can go toward private school in elementary, middle, or high school. Another recent change is being able to use it to pay off student loans.
The funds can be used for more than just tuition. Room and board on-campus or off-campus rent and utilities can also be covered by the 529 plans. Books and supplies, including a laptop, can be paid for with the 529. What if your child or grandchild doesn’t go to college? The beneficiary can be changed to another family member with no tax implications.
Finally, David talks about how this is not subject under the gift tax if you give less than $15,000 or less than $30,000 if you’re married. There is a way however to do a lump sum contribution if you are feeling behind in contributing. It’s a nice way to fund a grandchild’s account for college or approved educational expenses. Are you contributing to a 529 plan?
Listen to the entire episode or skip ahead using the timestamps below.
[0:44] – What’s the weather?
[2:36] – What do you need to know about 529 plans?
[3:57] – In many cases, you get a tax deduction for contributing.
[6:59] – 529 plans aren’t just for college.
[8:43] – It’s not only for tuition.
[10:24] – You can change the beneficiary.
[11:59] – What about the gift tax?
“529s are underused. There’s enough flexibility built into most of these accounts, and especially in Missouri and Kansas where you get a state tax deduction, where they’re absolutely worth a look.”
– David Dickens
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