By Hon. Michael L. Fitzgerald
State Treasurer, State of Iowa
With the New Year quickly approaching, there is no better time than the present to start thinking about putting the finishing touches on 2013. Why not end 2013 with a bang by donating to a child’s future college fund? You can remember 2013 by possibly giving yourself multiple tax benefits at the same time.
By contributing to a state-sponsored 529 plan, your contributions and earnings grow free of federal income taxes. Contributions are also tax-free when used to pay for qualified higher education expenses at any eligible college, university, community college or accredited technical training school in the United States or abroad.*
Along with the federal tax benefits, 34 states and the District of Columbia offer state tax deductions or credits for contributing to certain 529 plans. This means you could help your tax refund grow to an even larger amount for 2013. To learn more about your state’s plan and to compare each state’s 529 plans, visit the College Savings Plans Network comparison tool.
When deciding how to ring in the New Year, stop and consider investing in a 529 plan. By starting early, saving a little at a time and making smart investment choices, you could make 2013 a year never to forget. Not only will you get a tax incentive, but 2013 could be the year you took that first step towards helping a loved one start financing the path to the rest of their life.
*Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
About the Author:Iowa State Treasurer Michael L. Fitzgerald is the Chair of the College Savings Plans Network and the administrator of Iowa’s 529 College Savings Programs including College Savings Iowa, with more than $3 billion invested.