College Savings Iowa 529 Plan
Have you thought about a college savings plan for your child or grandchild? With rising tuition costs, the funding of children’s higher education expenses has become a growing concern. The key is to start early.
College savings plans provide valuable tax incentives, including the potential for tax-free growth and in some states, like Iowa, a state tax deduction for contributions. Like IRA contributions, it makes sense to contribute in the beginning of the year so the earnings for the year are not taxable.
The College Savings Iowa 529 Plan offers numerous tax incentives that make it attractive to save money for college for a child, grandchild, friend, or other relative.
- Federal income tax benefits. Your assets grow tax-deferred, and withdrawals are exempt from federal income tax when used for qualified higher education expenses.1
- Additional advantages for Iowa taxpayers. Earnings are fully exempt from Iowa state income tax. In addition, withdrawals are exempt from Iowa state income tax when used for qualified higher education expenses. Iowa taxpayers can deduct up to $2,865 in contributions per beneficiary account from their adjusted gross income for 2011. So for example, a married couple with two children contributing to separate accounts can deduct up to $11,460 (that's 4 x $2,865) in 2011. 2
- Federal gift tax incentive. You can contribute up to $65,000 in a single year ($130,000 for a married couple filing jointly) for each beneficiary without incurring federal gift tax, provided you don't make any other gifts to that beneficiary for five years.
Questions regarding College Savings 529 Plans? Ready to get started? Contact Donna Sanders
, Vice President of World Trend Financial at email@example.com
1 - Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
2 - If withdrawals are not qualified, the deductions must be added back to Iowa taxable income.