By Hon. Michael L. Fitzgerald
State Treasurer, State of Iowa
November 27, 2013
With Thanksgiving only a few days away, many people are sharing with others what they are thankful for. Like many, I have a lot to be thankful for. In June, we welcomed my first grandchild, Michael John to the family.
As I watch him grow, I hope to help prepare him for all the opportunities life may throw his way, which is why I am opening a College Savings Iowa 529 Plan account for him. Not only does this allow me to take advantage of the great tax benefits, but I am also able to help little Michael with his future education expenses. By investing in a 529 plan, I know all of my contributions and earnings will grow free of federal income taxes and remain tax-free when used to pay for any qualified higher education expenses he may have.*
In addition to the federal tax benefits, as an Iowa taxpayer I am able to take a state income tax deduction for my 2013 contributions to little Michael’s College Savings Iowa account. Iowa is not alone in offering state tax incentives to save for higher education costs through a state-sponsored 529 plan. Thirty-four states and the District of Columbia offer tax deductions or credits for contributing to certain 529 plans. However, most of these states do require investors to contribute before the end of the year in order to reap the tax benefits in 2013.
So while thinking about all you have to be thankful for this holiday season, take an extra moment to consider opening a 529 account for those ones you love. They will thank you for it later!
*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.