There are many different ways to fund your child’s future college education. One option is to contribute to a Coverdell education savings account. These accounts are tax-advantaged, but not everyone can contribute to them. You must earn low income to qualify for them, but your child’s money will grow tax-free and may be eligible for state tax benefits as well. The amount you contribute will depend on the type of account you choose, but if your family qualifies, you can choose to contribute a certain percentage of your income.
529 plan is tax-advantaged investment plan
You can invest in a 529 plan if you live in the United States. Anyone with a Social Security number and a Taxpayer Identification Number (TIN) can open a 529 account for their child’s education. Although most 529 account savers are parents, friends and family can open accounts as well. You can also open a 529 account if you are new to investing.
Contributions to a 529 plan are not subject to gift tax. Contributions up to $75,000 are tax-free when made over a five-year period. In addition, you’ll benefit from the gift tax-averaging feature. This allows you to treat contributions evenly over five years and save up to $75,000 per year.
The tax-advantaged benefits of a 529 plan outweigh the costs of college.
Prepaid tuition plans are prepaid tuition plans
Prepaid tuition plans are a convenient way to guarantee your child’s future by locking in the cost of tuition at the current rate. Typically, … READ MORE ...