By Hon. Michael L. Fitzgerald
State Treasurer, State of Iowa
March 1, 2013
Still trying to figure out the best way to spend your tax refund this year? Instead of splurging it on something that will be gone before you know it, why not invest it in something that will last a lifetime, such as a loved one’s 529 college savings account. While their college years may seem a long ways off for some, the time to save for those higher education expenses is now. By starting early, saving a little at a time and making smart investment choices, families can make their 529 plans work for them and get the most out of these precious years.
State-sponsored 529 plans are designed to provide families and friends a tax-advantaged way to save money for those future higher education expenses. Investors are able to withdraw their investment federally tax-free to pay for qualified higher education expenses, which includes tuition, books, supplies and certain room and board costs at any eligible college, university, community college or accredited technical training school in the U.S. 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, which could help that tax refund grow to an even larger amount for the next tax year. To learn more about and compare each state’s 529 plans, check out the comparison tool at the CSPN website.
When you are making those final decisions on the best way to spend that extra money this spring, be sure to consider investing it in a child’s education by way of a 529 savings plan. You will be glad you did!
*Earnings on non-qualified withdrawals may be subject to a 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.