As a Mom of 3, my schedule is pretty hectic. Between High School fairs, middle school applications, and searching for the perfect preschool, the only thing their schedule has in common is one thing …and that’s their future!
So when Momtrends invited me to the NY529 Craft and Create event, I knew it was one I couldn’t miss. This was my day to learn about crafting the perfect plan for my children’s future! But where do I start?
What exactly is a 529 Savings Plan? It’s pretty simple. It’s a type of investment account you can use for a higher education savings. How can you use the money in a 529 plan? You can use it to pay for anything that’s considered a qualified higher education expense. Such as books, supplies, computer related services and certain room and board fees. Even post secondary trade, vocation schools, 2-4 year colleges and postgraduate programs! All the FAQ’s are pretty simple and laid out in detail here.
Who can open a 529 plan? Just about anyone! Whether its you, the grandparents, relatives, and even friends! As an account owner, you pick investments, assign a beneficiary and determine how the money is used. So, what happens if your child doesn’t need the money or decides they don’t want to go to college? If you have other children, you can pass the beneficiary down to a sibling or you can withdraw the money but note that it will be taxed and you’ll pay an additional 10% on earnings growth.
The break down:
- Your earnings grow federally tax deferrred, qualified withdrawals are tax free, and some states like New York have other tax benefits as well.
- 529 account contribution limits are generally high—from $200,000 to $300,000 or more, depending on the state. For the Direct Plan, you can contribute up to $375,000 on behalf of one beneficiary. This amount includes all New York-sponsored 529 savings accounts held for the same beneficiary.
- Earnings on qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state and local taxes.
- Up to $10,000 is deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. May be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan or nonqualified withdrawals.
Choosing a plan:
Choosing a plan is simple. Visit the NY Direct site http://www.NYSaves.org and try their College savings planner tool http://www.archimedes.com/vanguard/csp.phtml to see whether you’re likely to reach your college goals.
You can also head over to the 529 state tax deduction calculator to get a quick estimate on the state tax deduction or credit you could recieve for your 529 contribution this year! http://www.archimedes.com/vanguard/stdc.phtml
For more information about New York’s 529 College Savings Program Direct Plan, obtain a Disclosure Booklet and Tuition Savings Agreement at http://www.nysaves.org or by calling 1-877- NYSAVES. This includes investment objectives, risks, charges, expenses, and other information. You should read and consider them carefully before investing.
Disclosure: Compensation was provided by NY529 Direct via Momtrends.The
opinions expressed herein are those of the author and are not indicative of the opinions of NY 529 Direct or Momtrends.