It is really here! We are getting ready for college. I have been thinking of my NY529 plan a lot lately and some wonderful advice that I received a few years ago “Every dollar saved is one less dollar borrowed.”
With my oldest savvy now a junior, we have been on the road traveling through NY and Vermont so far. We are welcomed with signs that say “Join us”. How do we choose? Only time will tell. Will it be a private college or university? Will it be a state school?
I might not be exactly where I would like to be in my savings for college but I have been doing my best. And like I said already “Every dollar saved is one less dollar borrowed.”
Getting Ready for College with a 529 Savings Plan
If you have questions about the NY529 Plan, I have answers to the most FAQ.
What is a 529 college savings plan?
It’s a type of investment account you can use for higher-education savings. 529 plans are usually sponsored by states.
What makes a 529 Savings Plan so powerful?
Tax savings. Your earnings grow federally tax-deferred, qualified withdrawals are tax-free,* and some states (like New York) have other tax benefits as well. Up to $10,000 is deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. May be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan or nonqualified withdrawals.
How can I use the money in a 529 account?
College isn’t just about tuition. There are so many other expenses as well. It’s great to know that it can be used for many of the things listed below.
You can use it to pay for anything that’s considered a qualified higher-education expense, including tuition; books; supplies; equipment; expenses for the purchase of certain computer equipment, software, and computer-related services; and certain room and board fees.
What happens if my child gets a scholarship?
Scholarships are consider an exception to the above. As long as the equivalent amount of the scholarship is withdrawn, the money would not be subject to a penalty. However, you would owe income taxes on any earnings since you had the benefit of tax free growth.
How much can I invest?
529 account contribution limits are generally high—from $200,000 to $400,000 or more, depending on the state. For the Direct Plan, you can contribute up to $520,000 on behalf of one beneficiary. This amount includes all New York-sponsored 529 savings accounts held for the same beneficiary.
Another great feature of is that your 529 account can be used to pay for qualified higher-education expenses at any eligible educational institution, including:
- Post-secondary trade and vocational schools.
- 2- and 4- year colleges.
- Postgraduate programs.
It doesn’t take a lot to start an account either. You can visit www.nysaves.org and start an account with as little as $25.
With the NY 529 Direct College Savings Plan, friends and family can contribute to your child’s 529 account. You can learn more about Ugift here.
Fun Facts Learned about the NY529 Plan
- Beneficiaries can attend college in any state, not just the state sponsoring the 529 plan.
There are no income restrictions to open a 529 account.
- An “eligible education institution” is a school that has been assigned a federal school code by the Department of Education.
- The account owner—not the beneficiary—is always in control of the account, even when the beneficiary becomes an adult.
- There is no age limit for beneficiaries of a 529 on a 529 plan.
- A beneficiary can have more than one account. For example, parents can open an account for a child and grandparents can open an account for the same child.
- Advantages of a 529: tax deductions, tax-deferred growth, and tax-free withdrawals.
Recurring contributions are a convenient way for account owners to set up regular contributions.
- 529 funds can be transferred to a close relative of the beneficiary if he or she doesn’t need the money.
There are so many great reasons why you should open a NY 529 Direct College Savings Plan. By visiting www.nysaves.org, you can find out all the facts and start one today.