529 IRS BenefitsTitle 26, Subtitle A, Chapter 1,Subchapter F, Part VIII, Section 529 is the original name of the laws overriding the Qualified Tuition Programs(QTP), which the layman would prefer calling the 529 plans. These are educational programs devised to come to the aid of those who desire to save enough for their children's prospective education The 529 plans offer various benefits amongst which tax-benefits are the most eye-catching. Every state has at least one plan to offer and many of these plans are immensely flexible, a characteristic that greatly helps those who live outside the premises of a definite state. Any 529 plan allows mare than one person in a family to contribute to the pool of investment. The plans have been named after the Internal Revenue Service tax code that is a source of special tax breaks for families. The growth of the money invested in any 529 plan is ensured if the investments are done through stocks, bonds and even various money market funds. Under the college savings plans the investor does not have to go by any minimum income restriction and there is no area- specification where savings plans are concerned. The money kept within the confines of the plan can be used to spend on tuition fees, boarding, books and supplies and since the savings are taken care of managing such a plan becomes easy. Prepaid plans and college savings plans are the two heads under which 529 plans can be broadly divided. Both have individual merits but since this discussion hopes to capture an overall view of 529 plans the benefits can be briefly glossed over. In most plans there is no age limit assigned to the beneficiary and if the beneficiary is changed to someone within the same family no tax is even levied. For some plans the investor has the freedom to keep his beneficiary unchanged yet change the plan. Complete control over the account is another advantage of 529 plans. In this case the beneficiary can't even access the account and the contributor can withdraw his assets whenever he likes (though the money then becomes taxable). The donor also can decide whether he wants to invest through the state or through some well known investment company. Among all the benefits that can be gained under the 529 plan the most attractive is perhaps the friendly tax treatment it offers. Most of these plans are exempt from federal tax which means that if money from the account gets withdrawn for education expenses the amount won't be considered as taxable. Certain states allow an investor to deduct the contributed amount from state tax. Thus with so many tax benefits being offered to investors of late, would you like to be far behind? |