Funding a college education with a tax-advantaged investment plan is a solid financial decision. You can use a 529 plan to do this.
What is a 529 plan?
It is a savings plan operated by the state or educational institution that has certain tax advantages and other potential incentives associated with it. Each state may have a different way the plan is operated or managed. In some states, it’s a prepaid tuition plan, and in others, it’s a savings plan. The “529” in the title refers to the fact that this plan is operated in accordance with Section 529 of the Internal Revenue Code.
Who can use a 529 plan?
Anyone! There are no income or age restrictions to use the plan. You can use the plan to fund your child’s education – or your own. You can also open multiple 529 plans for multiple people. For example, you can open one for each of your children or grandchildren.
Are there contribution limits?
Yes. There are certain limitations to your contributions. Mainly, you cannot contribute more than the amount necessary to cover the cost of the beneficiary’s education expenses each year. Specifically, the IRS states that if your contributions (plus any other gifts) to a particular beneficiary exceed $14,000 during the year, there may be gift tax consequences.
As with any investment you make, it’s essential you understand all of the advantages and disadvantages of that investment in your financial circumstance. To learn more about the 529 plans available at BancorpSouth, give us a call at 1-888-797-7711.
Information is for informational purposes only and is not intended to provide legal or financial advice.
