Deductions and Credits Get Educated on College Savings Tax Breaks Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Published Aug 28, 2008 2 min read As colleges welcome students back for the fall, many parents can attest that paying for higher education is a challenge. Fortunately, both federal and state governments offer tax breaks to families who save for college, using what are known as 529 savings plans. The plans are named after Section 529 of the Internal Revenue Code and are sponsored by state agencies. Every state has one or more 529 plans, offering various mutual-fund-like investments, and any family can invest in any one of the more than 100 state plans. So what do these plans offer that you wouldn’t get with regular mutual funds? Money-saving tax advantages: • While you can’t deduct your contributions on your federal taxes, the earnings can be withdrawn tax free if used for eligible college expenses. These include tuition, and room and board. • Many states do allow you to deduct your contributions or receive a credit on your state taxes, if you contribute to that state’s plan. If you’re a New York resident, for example, you can deduct up to $5,000 of a contribution to a New York 529 plan ($10,000 if filing married jointly) on your state tax return. To check out your state’s plans and tax benefits, see http://www.collegesavings.org/viewState.aspx. • Even better, some states will let you deduct your contribution even if it was made to another state’s 529 plan. Kansas, for example, allows its residents to deduct up to $3,000 ($6,000 for joint filers) per student per year for contributions to its or any state’s plan. • And finally, some states, like the federal government, let you withdraw earnings tax free. Again, check http://www.collegesavings.org/viewState.aspx. If your state doesn’t yet allow a deduction or credit for your 529 plan contribution, keep your eye on your state tax website. More states are moving in that direction. For more information on 529 plans, check out: http://www.sec.gov/investor/pubs/intro529.htm http://www.collegesavings.org/index.aspx http://www.savingforcollege.com/ http://www.savingforcollege.com/kiplinger/plan_details.php Next Post Giving Alert! Thrift Stores, Charities Need Your (Tax Deductible) Donations Written by More from Leave a ReplyCancel reply Browse Related Articles Tax News Intuit TurboTax April Report: A Look at Refunds and S… Tax Planning April 15 is the Tax Deadline: 6 Things You Need to Know… Tax Planning Unable to Pay Your Tax Bill? Here’s What To Do Tax Tips Tax Credits 101: What They Are & How They Work Business How to Know if You Should Invest in Business Insurance Tax Deductions and Credits What Is the Standard Tax Deduction for 2023 – 202… 401K, IRA, Stocks Should You Use Your 401(k) or Retirement to Pay Off Deb… Tax Planning What Happens If You Don’t Pay Taxes? Understanding Pe… Tax Deductions and Credits Family Taxes: Take Advantage of Tax Savings Taxes 101 How Much Do You Have to Make to File Taxes? Demystifyin…