It’s back-to-school time, and that means many families are thinking about how to afford the staggering costs of college. Thankfully, qualified tuition programs are great tax tools for taking some of the sting out of higher education expenses.
Also called Section 529 Plans, qualified tuition plans are open to everyone, regardless of age or income level. They make it possible for family members and others to give substantial funds toward a college education while retaining control over the money. Any earnings on these accounts accumulate on a tax-deferred basis and remain tax free as long as they’re being spent on qualified higher education costs.
Section 529 Plans may also be set up for estate planning purposes, allowing grandparents to contribute large sums of money to a grandchild’s college education fund while avoiding the gift tax. Not only does this reduce the total of the taxable estate, but it also ensures control over those assets even after they’ve been diverted from the estate.
That’s an important distinction of qualified tuition plans from other types of savings plans that become the property of the child at the age of maturity. No money can be withdrawn from a 529 Plan without the consent of the account owner. What’s more, if the designated child decides not to attend college, the plan owner can then name a different beneficiary to the account.
If you’d like more information about qualified tuition plans for a child’s future schooling or you have other questions about tax planning, contact Taxation Solutions, Inc. as soon as possible. There’s a lot to learn when it comes to paying for college, and we’re the knowledgeable tax team with 40+ years of experience on our side. Give us a call today!