Disclaimer: This is a sponsored post, I have been compensated in an effort to educate my audience on the NY529 College Savings Program.
Cooking Up A Bright Future
Last week I learned all about how to get financially prepared for DJ’s college years by investing with NY’s 529 College Savings Program while DJ had a fun cooking lesson with The Institute of Culinary Education. I was pleasantly surprised how contributing into a savings even as a widowed single mom would be affordable and effortless.To start let me begin with the basics to help you understand how it works.
What is a 529 College Savings Plan?
It’s a type of investment account you can use for higher-education savings. 529 plans are usually sponsored by states. You can use it to pay for anything that’s considered a qualified higher-education expense, including tuition, books, supplies, equipment, expenses for the purchase of certain computer equipment, software and computer-related services and certain room and board fees.
Just about anybody can open a 529 account- parents, grandparents other relatives, friends as long as he or she is a U.S citizen or a resident alien. As an account owner you’ll pick investments assign a beneficiary and determine how the money is used. If you’re a New York State taxpayer you can also benefit from the state tax deduction.
- On holidays, birthdays and special occasions family and friends can contribute to the 529 account using a special “Ugift” code.
- Beneficiaries can attend college in any state, not just the state sponsoring the #529 plan.
- A beneficiary can have more than one account. For example, parents can open an account for a child and grandparents can open an account for the same child.
- There is no age limit for beneficiaries of a 529.
- 529 funds can be transferred to a close relative of the beneficiary if he or she doesn’t need the money.
Can 529 accounts only be used to pay for college?
No. Your 529 account can pay for qualified higher-education expenses at any eligible education institution including; post secondary trade and vocational schools, 2 and 4 year colleges and postgraduate programs.
How much can I invest?
529 account contribution limits are generally high from $200,000 to $300,000 or more depending on the state. For the Direct Plan you can contribute up to $375,000 on behalf of one beneficiary. This amount includes all New York-Sponsored 529 Savings accounts held for the same beneficiary.
How does this help with my taxes?
Tax Savings. Your earnings grow federally tax-deferred, qualified withdrawals are tax-free* and some states like New York have other tax benefits**.
*Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state and local taxes.
** Up to $10,000 is deductible annually from New York Stare income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. May be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan or nonqualified withdrawals.
What you should know.
Investments in the plan are subject to risk. Before you invest, consider whether your beneficiary’s home state offers any state tax or other benefits that are only available for investments in that state’s 529 plan.
New York’s 529 College Savings Program currently includes two separate 529 plans. The Direct Plan is sold directly by the Program. You may also participate in the Advisor Plan, which is sold exclusively through financial advisors and has different investment options and higher fees.