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Tax incentives

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Tax advantages explained

529 plans offer generous tax advantages to encourage families to save for college. Tax-free savings, state deductions and credits, and annual gift tax exemptions are just a few perks. Make the most of them all.

Tax-free gains. Tax-free savings.

Contributions to your 529 account are considered after-tax, similar to Roth IRAs. While there is no federal tax deduction for contributions, your money grows taxdeferred, meaning you pay no annual taxes on any earnings. Most importantly, as long as any gains earned in your account are used for qualified higher education expenses, gains will be tax-free.*

Gift without the taxes

Get friends and family in the habit of gifting to your 529 account. It’s the best way to see savings add up. Make sure family and friends know just how much they can give without having to pay a federal gift tax.**

In 2022, you can contribute up to $16,000 per child and account each year (or $32,000 for joint filers). 

More tax advantages for the whole family

Talk to a financial planner about the advantages of qualified tuition plans when estate or legacy planning — especially for grandparents who can open 529 plans for their grandkids. For instance, a grandparent’s estate wouldn’t be taxed on contributions to their 529 plan.***

 

*Gains that are withdrawn to pay for non-qualified education expenses are subject to federal taxes and a 10% penalty. Many states do offer state income tax deductions or credits for contributions to 529 accounts. Often the benefits apply only to that state’s 529 plans. However, if you live in Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana or Pennsylvania, you may be eligible to claim an income tax deduction or credit for contributions to any 529 plan, including Private College 529. Consult your tax advisor for information specific to your situation. 

**Or up to $80,000 ($160,000 for joint filers), prorated over a five-year period. If the contribution exceeds $80,000 in the five-year period, the excess will be a taxable gift in the year of contribution.

***The owner retains complete control of the account. If the account owner dies before the end of the five-year period, a prorated amount will be added back into the estate. Consult your tax advisor for information specific to your situation. 

10 minutes could change everything. Start your journey with savings, today.