Suze Orman's All-Star Advice - Episode 3
529 College Savings Plan Basics:
-A The money in a 529 account grows tax-deferred, all qualified withdrawals for higher education expenses remain Federal and State tax-free.
-Money is excluded from your taxable estate.
-No minimum annual contribution is required.
-One can contribute a maximum of $13,000 per year per beneficiary without incurring federal gift taxes.
-Withdrawals from each account can be used at the large list of eligible schools nationwide.
-The 529 covers almost all expenses related to college including tuition, fees, books, equipment, and supplies. (Reasonable room and board are considered qualified expenses if the student is enrolled at least half time.)
-If a child decides not to attend college or does not use all of the funds, the account beneficiary can be changed to another member of the family.
-The account owner may close the account or withdraw all or a portion of the funds at any time, even for non college-related expenses; however, any funds withdrawn for nonqualified expenses will be subject to the account owner's income tax rate plus a 10% IRS penalty on the earnings portion of the withdrawal.
-If the beneficiary receives a scholarship, the account owner may withdraw funds up to the amount of the scholarship without paying the 10% IRS penalty on the earnings portion of the withdrawal.
Next: I need to prioritize my student loan debt and I need your best advice.
Published on January 16, 2011