Fund Your Education with a 529 Plan
If there is one aspect of education that gives most students and parents headaches is tuition fees plus all the extra expenses that accompany one’s semesters in school. In a bid to lessen this burden, the United States government introduced the 529 Education Savings Accounts back in 1996 as part of the Internal Revenue Code. Basically, a 529 plan is a form of savings account meant for college students and one that is exempted from federal taxes. For in-state students, this means a whole lot of tax benefits. Each state has the ability to set its own contribution limit. In 2014, the limit lies somewhere between $300,000 and $380,000.
The age limit for opening a 529 Account is 18 years. This applies for both U.S citizens and aliens. The beneficiaries in this case are basically younger relatives. The account can be opened through a bank, online or via investment advisors. A 1099 form will only be filled when one is withdrawing tuition fees from the account. This is because the plans are tax-deferred. The cash saved is strictly meant to be used for boarding costs, tuition fees as well as the purchase of other necessary supplies.
Withdrawals that have not been approved have to be indicated on the 1099 form and will be charged a 10% penalty. It is possible to apply for a 529 Account in any state though some state only offer 529 accounts to their citizens. Alaska, Utah, Kansas and New York have been ranked as the top performance states in 529 plans. Different taxes have different benefits and regulations. Make sure to perform a detailed research before choosing a plan.