Fox Business News: 529 Plan Savings For College
Tax free college savings plans are increasingly popular ways for parents to set aside earnings in tax deferred accounts for their children’s education. Earnings are tax exempt if use for qualified college expenses. Known by their IRS code as 529 Plans these savings plans are available in all states. However, it is important for consumers to do some due diligence and review state programs for their performance over time. A good place to do some quick and easy research can be found on www.savingforcollege.com.
An important element of 529 plans is that in case a child does not use the earnings it can be kept for the use of a grandchild or even by the person who set up the account. The negative tax consequences are that earnings are taxed at ordinary income tax rates and, in addition, there is a 10 percent penalty if the money is withdrawn for non-qualifying use. We encourage our clients with children to start saving early and have the discipline to set a sum aside every month.
Click here to view the video on 529 Plan Savings for College.