Education Tax Planning For Children 's Education

1712 WordsJul 31, 20167 Pages
Education Tax Planning INTRODUCTION Suppose your child just started kindergarten and possibly the most important thing that is overlooked up to this point is college. Did you know that starting early to help fund your children’s education can be beneficial for you and your children? With the college tuition inflation rates increasing each year, it is very important to start early so you and your child can be prepared. A national study by Sallie Mae® shows that only 48% of families are saving for college. This is compared to 51% in 2014, 50% in 2013, and 60% in 2010. It is a substantial decrease from previous years. It is never too late to start planning for your child’s education; however it is very important to do so. Successful…show more content…
The 529 Plan, which is named after a section in the Internal Revenue Code, is a qualified tuition plan that is operated by a state or educational institution. They offer tax benefits and other advantages. Nearly every state offers a 529 Plan and can be chosen based on preference of the features and benefits of each plan. There are two types of 529 Plans: College Savings Plans and Pre-Paid Tuition Plans. Savings Plans work much like a 401(k) where the funds can be saved in mutual fund accounts. Prepaid plans let you pre pay all or part of the college tuition. Since each state differs based on investment options households need to consider many factors, including the age of the beneficiary, their own risk tolerance, and their overall financial situation. Households may find some options more suited to their savings needs than others. Whatever option is chosen will be the best option well suited depending on the individual. The following pictures will show two different savings plans in two different states: These two are the Savings Plans that can be chosen. The individuals interested in the Bright Directions College Savings Program in Illinois can be enrolled through a financial advisor where individuals interested in the Texas College Savings Plan can be enrolled directly into the program. Both plans offer maximum contributions up to at least $350,000. In Illinois, there are no minimum
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