SAVING FOR COLLEGE
Reprinted from the Arizona Commission for Postsecondary Education Website.
Financing their children’s college education is a topic that regularly comes up in mediation. There is a new college investment plan that many of our clients are using. A 529 Plan is an investment plan operated by a state, designed to help families save for future college costs. As long the plan satisfies a few basic requirements, the federal tax law provides special tax benefits.
The Arizona Family College Savings Program is a state-sponsored 529 plan that allows parents, grandparents, or even friends to invest in a child’s higher education. By taking advantage of section 529 of the Internal Revenue Code, money grows tax free. The parent remains in control of the account and when distributed to pay for qualified higher education expenses, no federal or Arizona state income taxes are paid.
The Arizona Family College Savings Program offers a wide variety of choices through 4 financial institutions for families investing in the future of their children. Arizona welcomes the Fidelity Arizona College Savings Plan as the 5th choice to begin in June of 2005. Choices includes CD’s advisor-sold mutual funds, direct-sold mutual funds, passively and actively managed accounts, age-based portfolios, and self-designed custom strategies. Choices are offered so that your investment goals can be met on the timeline that fits your needs.
The cost of college attendance has increased at twice the cost of inflation over the past 20 years, and the financial aid available has decreased over the past decade. The result is a higher, and perhaps debilitating, debt burden placed upon the new graduate. This is illustrated in Arizona by two facts. First, the cost of attending one of Arizona’s public universities increased 46% between 2002 and 2005. And second, the average loan borrowed by an Arizona graduate in 2003 was $3,622. Arizona ranks in the top ten states with the highest loan amount in undergraduate students.
Stating early with a systematic savings and investment plan will allow you to fund your child’s opportunity. By savings for your child’s postsecondary education you can look forward to (1) freeing him to make the correct college choice and (2) allowing her to enter life after college without a debt burden that inhibits future financial success.
Reprinted from the Arizona Commission for Postsecondary Education Website. For more information, go to its website at: http://collegesavings.azhighered.org/acpe_csp_default.aspx?pageid=17.
SAVING FOR PRIVATE SCHOOL
In the 2017 Tax Cuts and Job Acts passed by Congress, parents will be able to use money contributed to 529 Plans to pay for private school as well as college. Parents will be able to take out $10,000.00 maximum from these tax free accounts each year to use for elementary and secondary school. Each state can determine whether to give a tax deduction to parents who contribute to a 529 Plan that now can also be used for paying for private schools and not just college education.
Under the 2017 Tax Cuts and Jobs Acts, parents who have 529 accounts may roll over money in those accounts to ABLE Accounts. ABLE Accounts are designed for individuals with disabilities that developed before age 26, who can use the money in the account for education, housing, health and wellness, transportation, assistive technologies, and other qualified services. Like 529 Accounts, the money in ABLE Accounts can grow tax-free.