Funding College

As the new school year approaches it brings around thoughts of “how am I going to pay for my child to go to college?” You might want to consider a Section 529 Plans (named after the section of the IRS Code that created them). These plans were established to help families save and pay for college and are available to everyone, regardless of income. These state-sponsored plans allow you to gift large sums of money for a family member’s college education, while you maintain control of the funds. The earnings from these accounts grow tax-deferred and are tax-free if used to pay for qualified higher education expenses. They can be used as an estate-planning tool as well, providing a means to transfer large amounts of money without gift tax. With all these tax benefits, 529 plans are an excellent vehicle for college funding. A common mistake we see with the 529 plans are not checking with your states plans first as there may be additional tax benefits. For example, here in Colorado you receive an additional deduction on your state tax return if you invest in Colorado’s 529 plan.