College is Right Around the Corner

Why Start Planning Now?

• A child that is born now will face tuition costs that are three to four times higher than what they are now.
• It is never too early to start planning for your child's future.

Putting Money Into Section 529 Plans?

• Earnings are federal and state income tax deferred, and withdrawals are federal tax free, if used for qualified higher education expenses. Some states offer a deduction for contributions.
• Tuition, fees, books, supplies, equipment and room and board are qualified expenses.
  
• The amount that can be made varies by state. Some states may allow account balance limits as high as $250,000/beneficiary.
• There are no income restrictions.
• Earnings on non-qualified withdrawals taxed at owner’s rate plus 10% penalty. Withdrawals can be made in amount equal to scholarship

Putting Money Into Mutual Funds?

• Money can be withdrawn anytime for any purpose.
• There is no limit on how much can be invested, no income restriction, and no impact on tax credits.

Putting Money Into Education IRA?

• The earnings are exempt from federal income tax, if used for qualified elementary, secondary and higher education expenses.
• Tuition, fees, books, supplies, equipment and room and board are qualified expenses.
• The account value is removed from the account owner’s taxable estate.
  
• Up to $5,500 can be invested into the account, per year per beneficiary.
• The earnings on non- qualified withdrawals are taxed at the owner’s rate; 10% penalty on earnings.
  

Putting Money Into Traditional & Roth IRA?

• Traditional IRA may be tax- deductible and entire proceeds taxed at the owner’s rate.
• Earnings on Roth IRA are tax-exempt, but the account has to be held for 5 years for distributions and the owners are 59½ or older.
• The account value is included in the account participant’s taxable estate.
  
• Up to $6,000 can be invested into the account per year.
• Tuition, fees, books, supplies, equipment and room and board are qualified expenses.
• There are no impact on tax credits
• No penalty on early withdrawals if used for qualifying education expenses. For Roth IRAs, earnings of early withdrawals taxed at the owner’s rate.
  

Putting Money Into a UGMA/UTMA?

• When child is under the age of majority, first $950 of unearned income is tax exempt; next $950 taxed at the child’s rate; the rest at parent’s rate. After child turns 18, all earnings taxed at child’s rate, unless enrolled as a full-time student, then age 24.
• There is no limit on how much can be invested, there is no income restriction, and no impact on tax credits.
• Money can be withdrawn anytime for the benefit of the child