How changes in 529 College Savings Plans can help elementary school families pay tuition today
Grymes is proud to offer Tuition Assistance and flexible, interest-free payment options to make the cost of tuition more accessible for any family
How on earth can paying tuition be interesting, you might ask? Thanks to the newly passed tax code, 529 College Savings Plans are no longer just reserved for college tuition; they’re now applicable to K-12 tuition too, and that could mean considerable advantages for you.
Many of you may be scratching your heads wondering what a 529 Savings Plan is, and you would certainly not be alone. You may recall seeing this guy in Virginia529 television ads. In the ads, this “green monster” represents your child’s future college tuition, a monster that can be abated with a 529 Savings Plan.
A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future college costs. * Forward-thinking parents can use a 529 Plan to put money away for college tuition down the road. Just like a savings account, the hope is that the funds tucked away in a 529 will grow over time through compounding interest. The difference, however, between a 529 Savings Plan and a regular savings account is that a 529 offers some interesting tax advantages. The money families put into a 529 each year is untaxed and grows free of tax. Further, since money added to a 529 Plan is pre-tax, payments towards a 529 Plan reduce a family’s annual taxable income. In other words, by putting money away each year into a 529 Plan to save for college, you lower your state income tax bill.
Even further, many states incentivize 529 savings by also allowing a tax deduction for families who contribute to their 529 Plan. According to virginia529.com, Virginia taxpayers investing in a 529 Plan may deduct up to $4,000 per account per year from their Virginia state individual income taxes. *
Up to $10,000 per year from 529 Plans can now be applied to elementary and secondary school tuition payments
(Even more interesting, click here for a recent story from NPR about how this legislation sneaked up on many states, many of which were unaware of this change before the new tax code was passed.)
It may be worth your while to research and discuss the option of a 529 Savings Plan further with your financial advisor
Please be mindful that this article is not intended to serve as financial advice for readers. We simply hope to share some interesting information that we encourage families to research thoroughly and consider carefully with guidance from a financial advisor.