College Savings Plans
College Savings Plans come in two flavors—prepaid tuition plans and Section 529 Higher Education College Savings Plans.
Prepaid tuition plans. Your cash contributions buy a specific number of course units at today’s prices. If tuition increases, the state pays the difference between the number of credit hours you bought and current costs-but only if the student attends an in-state school.
NextStudent Scholar'sEdge™ 529 higher education college savings plan. If you’re not sure your child will attend a state school, this may be the plan for you. The NextStudent Scholar’sEdge plan gives you the opportunity to contribute to a tax-deferred account established for the student (the named beneficiary), and invested in a savings vehicle, such as stock or a mutual fund. The amount available for college depends on the amount you invest and the rate of growth, which may or may not be enough to cover school costs.
College Savings Plans offer smart tax benefits
The primary reason parents turn to College Savings Plans, rather than a traditional bank savings account, is the generous tax benefits. Ask your tax advisor for details.
Tax Deferral: Not only do your savings accumulate tax-deferred, withdrawals used for educational purposes are tax-free.
Estate Tax Benefits: Section 529 programs allow you to reduce the value of your estate while maintaining control of your investments.
Gift Tax Benefits: You may contribute annually up to $11,000 per student (or annually up to $22,000 per student if you and your spouse contribute) without being subject to gift tax.
What’s more, these tax benefits may be coordinated with other education tax benefits.
The HOPE Scholarship Tax Credit provides up to a $1,500 maximum tax credit per year per dependent student.
The Lifetime Learning Tax Credit provides up to a $1,000 tax credit per family for postsecondary education courses.
The Tuition and Fees Deduction allows taxpayers to deduct up to $3,000 of tuition and related expenses—even if they don’t itemize.
Want to know more?
For more information, contact NextStudent at (800) 299-4639.
*Distributions from qualified tuition plans will be tax-free when used for qualified post-secondary education expenses beginning in 2002 for state sponsored plans and 2004 for privately sponsored plans. Without further legislative action, the tax-free status is set to expire for tax years beginning after 2010.
Disclaimer: Information provided by Laine Schoneberger; a registered representative offering securities and investment advisory services through MML Investors Services, Inc, member SIPC. 4350 East Camelback Road Bldg F150 Scottsdale AZ 85018 (602) 912-0213. Campbell, Schoneberger & Associates, Ltd. is not a subsidiary or affiliate of MML Investors Services, Inc. #051046.
For more information about NextStudent, visit www.NextStudent.com.
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