College won’t pay for itself. How will you pay for it? You may have more choices than you think.
Is creating a college fund on your to-do list? Consider these options.
Anyone can contribute to these savings vehicles. Some let you prepay college tuition; others allow you to accumulate and invest education funds. Earnings on investments in a 529 plan grow tax-deferred, and withdrawals are exempt from federal taxes when the money pays for qualified higher education expenses.
Yearly contributions to these accounts are limited to $2,000 per beneficiary. As with a 529 plan, contributions are not tax-deductible, but earnings grow tax-deferred and withdrawals are tax-free if used to pay qualified higher education costs.
UGMA and UTMA Accounts
These trust-like accounts let you invest for a child’s education by making irrevocable transfers of income-producing assets to that child (and a lower tax bracket).* When your child reaches maturity, however, he or she may use the assets in any manner.
Nothing prohibits you from using these accounts to build college savings, and if your student gets a full scholarship or doesn’t go to college, you can use the assets for retirement.
Through creative tax and income strategies, business and investment property owners can realize tax savings to apply toward college costs. A business owner can hire a son or daughter old enough to work as an employee, effectively shifting some business income from a higher tax bracket to a lower one. That can lower the business owner’s adjusted gross income and result in lower income taxes*.
*Subject to income limits.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.
This material was prepared for [Name] and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.
 usnews.com/education/best-colleges/paying-for-college/articles/2016-02-10/dos-donts-forusing-college-savings-withdrawals [2/10/16]
 fool.com/retirement/2017/02/24/whats-the-best-college-savings-account.aspx [2/24/17]
 usnews.com/education/best-colleges/paying-for-college/articles/2015/07/29/3-bigdifferences-between-529-college-savings-plans-utma-accounts [7/29/15]
 fool.com/investing/general/2016/04/01/saving-for-college-3-great-alternatives-to-a-529.aspx [4/1/16]
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