The maximum you can contribute to a 529 plan and still get state income tax benefits varies. State income tax deductions or credits generally have contribution limits.If using the money for K-12 tuition, let the gifter know that’s how the money will be allocated. Since funds from 529 plans can be used for much more than saving for college, relatives and friends who have made contributions for years may get confused on what their money may be used for. Allocating gifting gets more complicated.Don’t count on scholarships because of athletics or education from a specific school. Take time to consider how much you really want to pay for both your child’s K-12 schooling and college education. When elementary, middle and high school is in the same money pot as higher education, it may prevent families from saving enough for college. It could make saving for college harder.
Textbooks and required supplies are qualifying education expenses for higher education withdrawals.
529 eligible expenses fees plus#
The distribution limit takes into account all accounts for the student.For instance, if a grandparent, an aunt or uncle and a parent each open 529 plans for the student, they should coordinate so someone doesn’t end up with the 10% penalty plus taxes on earnings on withdrawals. According to the IRS, you can pay for tuition and fees up to $10,000 in “elementary or secondary (K-12) public, private or religious school of the beneficiary’s choosing.” Beneficiaries are assigned by the owner of 529 plan accounts as the person whose education will be paid for from this account. There are fewer qualifying expenses for K-12 education.If your state income tax rate is 5% and you contribute $4,000 that you withdraw the same year, you could save $200 on your taxes. You could deposit the money and withdraw it later in the year if needed. Depending on your state, you may get an income tax deduction or credit for contributions to a 529 plan. It can be a great short-term savings strategy if your child is going to private school anyway.It can be easier to request direct gift contributions for 529 plans than for other types of investment accounts. 529 plans have gifting options, websites and other resources for asking friends and family members to contribute to your student’s education. You have a variety of gifting options for K-12 tuition.You can save more in a 529 plan account on an annual basis than a Coverdell Savings Account, for instance, which also can be used for qualified education expenses at all levels of education. Your education savings account is versatile and virtually limitless.No matter what state you live in, you won’t pay taxes on growth from earnings on your investments and savings if you use the money for qualified education expenses.
Pros and Cons Pros of Using 529 Plans for K-12 Tuition You also could end up with state taxes as a recapture for state tax deductions on contributions. You would likely incur a tax penalty and federal income tax for any amount withdrawn for K-12 textbooks or other expenses beyond tuition. On the state level, your state may give you an income tax deduction or a credit on contributions. On the federal level, your account grows tax-free. Depending on the program, some fees will be paid directly to the host institution or program provider and not billed through KU, so you will have to check with your specific 529 plan to see what the procedure will be to pay for those fees.There are no differences in what is required to contribute to 529 plans for K-12 or college costs. Using 529 plans to pay for study abroad expenses follow the same process as paying for on-campus courses. KU study abroad program budgets will detail which payments, if any, are made through KU Enroll & Pay. health insurance, basic living expenses, and any costs associated with an international cell phone. Study abroad expenses that are not able to be covered with 529 plans include transportation, international health insurance, medical costs not covered by U.S. Study abroad expenses such as tuition and fees, program fees, room and board, and required textbooks are eligible to be funded with a 529 plan, just like they are in the United States. Many students who use 529 plans (college savings accounts) to fund their education at KU can also use their 529 plan for study abroad. Religious, Spiritual, and Non-Religious Students Using Financial Aid and Other Funding SourcesĪdult Learners and Non-Traditional Students Other Study Abroad Scholarship and Funding Opportunities
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