529 College Savings Plans Save Money for Families at Tax Time
WINOOSKI (March 18, 2014) – With tax season underway, most families are adding up deductions such as childcare expenses and charity donations to reap the largest refunds possible. According to the experts at the Vermont Higher Education Investment Plan (VHEIP), parents have another option for maximizing their tax benefits while also saving for their children’s future: a 529 college savings account.
“There are many options available to parents looking to save for their children’s education, but the ability to take advantage of the tax benefits of a 529 plan make it both a smart and popular choice,” said Scott Giles, president and CEO of the Vermont Student Assistance Corp. (VSAC), that administers the state’s 529 college savings plan. “With the Vermont Higher Education Investment Plan, you can start a tax-free account online with as little as $25 and add to it as you can. Many employers offer an automatic payroll deduction to make it even easier to save.”
What’s in a name?
The number 529 in the plan name refers to the section of the federal tax code that provides federal tax advantages for qualified tuition programs. Any earnings in a 529 plan grow free from federal and state income tax and won’t be taxed when used for qualified higher education expenses.
A credit not to overlook
A VHEIP account owner who is a Vermont taxpayer may receive a tax credit of 10 percent of the first $2,500 contributed per beneficiary, per year (or $5,000 per beneficiary for married taxpayers filing jointly). Rollovers from another state’s qualified tuition plan into VHEIP are also eligible for this income tax credit.
Contributions made to VHEIP by December 31, 2013 are eligible for the credit on the 2013 state tax return. For 2014 returns, the deadline is December 31 of this year.
For those who do not currently have a VHEIP account, tax time provides a good reminder of both the benefits of saving and for the need to save for higher education expenses. Accounts can be opened with as little as $25. Opening an account now will provide the opportunity for a deduction next tax season.
Since the start of the VHEIP plan in 1999, Vermont families have saved more than $225 million for college tax-free through VHEIP. In 2012, $36 million was invested into VHEIP with about $1.8 million realized in tax credits.
Approximately 3,470 families have withdrawn over $78 million to attend college across the country.
The VHEIP 529 college savings plan was established in 1999 and is Vermont’s only state-sponsored 529 plan. VHEIP is administered by the Vermont Student Assistance Corp. and managed by TIAA-CREF Tuition Financing Inc. For more information about VHEIP, visit www.vheip.org or call the customer service center at (800) 637-5860. Find us on Facebook at facebook.com/VSAC.
Vermont Student Assistance Corporation is a public, nonprofit corporation created by the Vermont Legislature in 1965 to help Vermonters plan and pay for education or training beyond high school. VSAC administers Vermont’s 529 college savings plan; outreach services to encourage low-income students to aspire to and complete college; college and career planning services for all Vermonters; need-based state grants for full-time, part-time and non-degree study; public and private scholarship programs; and private education loans. Find us at www.vsac.org or on Facebook at https://www.facebook.com/VermontStudentAssistanceCorporation.