Do you know about 529 savings plans? If you are not familiar with them, here are a few of their key benefits:
First, a 529 plan’s earnings are not subject to federal income tax, as long as withdrawals are used for qualified education expenses, such as tuition and room and board. Keep in mind, though, that you may be subject to ordinary income tax and a 10 percent federal penalty on earnings not used for these expenses.
Here’s another benefit: If you’ve established a 529 plan for a particular child or grandchild who eventually doesn’t go to college, you may be able to switch beneficiaries.
Plus, you’re free to invest in the 529 plan of any state. But if you invest in your own state’s plan, you may receive some state tax benefits, such as deductions or credits. Additional benefits also may be offered.
Be aware, though, that 529 plans may affect financial aid packages. Overall, though, these plans can help make the high cost of education more manageable – so give them some consideration.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor, Casey Caliva, at Historical 30th & Fern.
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.
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