VSAC will transfer the servicing of your Federal Student loans to American Education Services and the guarantee of all VSAC Federal Student loans to the Trellis Company, an approved Federal Guaranty Agency, over the weekend of March 16th. Click here for more information.
Look to Their Future with VT529 Education Savings … and get a 2023 Vermont Tax Credit
If you still need to buy holiday gifts for children (and any students) in your life, you may be asking yourself, “What can I give that will be lasting and meaningful, long after the gift wrap is thrown away?” And if you’re a parent or guardian looking to balance your books after finishing your holiday shopping, you may be asking yourself, “Are there more tax credits to take advantage of before the end of the year?” VSAC has a great answer to both questions, and just in time: a VT529 education savings account.
VSAC encourages families to look ahead as they plan for the futures of the children in their life. And we’re not alone. A recent College Savings Foundation survey found that 45% of parents would ask for gifts to their children’s 529 account to celebrate the holidays. By opening, or contributing to, a VT529 account, you can help fund education opportunities for anyone on your gift list AND get a credit on your Vermont tax return for deposits made by December 31.
What's a 529 Education Savings Plan?
A 529 education savings plan is an investment plan designed to help families save for higher education costs for college or career training. The plans are called “529s” because they’re named after Section 529 of the Internal Revenue Code, the part of the tax law that established these funds in 1996. While there are many 529 options out there, only the VT529 (formerly VHEIP) plan, administered by VSAC for the State of Vermont, offers an income tax credit to Vermont taxpayers.
Education Savings: The Gift that Keeps Growing and Giving
All 529 savings accounts, take advantage of compound interest. Compound interest allows an initial investment to grow over time, especially when you don't plan to make a withdrawal for many years. That’s one of many reasons why a 529 account makes a great gift for newborns and young children. But it's never too late to open a 529 account.
From teens to adults seeking training to further their education— 529 plans have no age limit! All earnings in 529 accounts grow tax-free. So when you take money out to cover qualified educational expenses, you don’t pay any state or federal taxes on your interest and gains. Plus, as you save, you can take a 10% Vermont income tax credit each year on funds that you deposit in a VT529 account.
Every dollar invested into 529 education savings plans can help your kids, grandkids, nieces, nephews, and even the children of close friends get ready for tomorrow’s opportunities. Studies show that students with education savings are three times more likely to pursue education after high school and four times more likely to complete that training. Which means they’ll be more prepared with the degree or credentials they need for their dream jobs and a high-demand future.
VT529: Easy to Start, Flexible to Use
Since 529 plans can be opened with just $25 (or less with payroll deductions), they're accessible for families at most income levels. A 529 account is flexible, too: When you fund a VT529 account, you can choose and change your investment strategy. VSAC's VT529 offers six investment portfolios to choose from (most families select the age-based plan, to match their children’s needs as they grow). Whichever option you initially choose, you can always change how the money is allocated as your investment goals change.
When it’s time to use your VT529 funds, the list of qualified education-related includes a lot more than just four-year college tuition. VT529 funds are flexible to use for:
- two-year college,
- trade & vocational programs,
- grad school, and
529 accounts can also be used to pay for:
- student food and housing costs—either on- or off-campus,
- books, and
- other educational equipment.
Families can even use 529 education savings to make student loan payments. Private K-12 schools can be paid for using 529 funds. And if the intended beneficiary for the 529 account decides not to use their savings, the funds can be transferred to a different beneficiary.
With VT529, You Can Give the Gift of Education Opportunity
VSAC’s Gift of College gift card is one easy way to give (or ask for) the gift of education opportunity. You can find VSAC’s Gift of College gift cards at Vermont locations of Cumberland Farms and Kinney Drugs stores, making it convenient to pick up a local card for the loved ones on your holiday lists. Learn more about purchasing or redeeming a VSAC Gift of College card.
Get a Vermont Tax Credit for 2023
VT529 is the only educational savings program that offers a Vermont state income tax credit. Deposits made into a VT529 account by December 31 qualify for a 10% tax credit, for contributions up to $2,500 per beneficiary per year (or up to $5,000 per beneficiary if filing jointly). Here are some examples:
- A single tax filer funding a 529 account for one child could claim a state tax credit up to $250.
- A couple could claim up to $500.
- For a family with two children, the single filer could claim up to $500, and the couple, $1,000.
- Rollovers from another state’s 529 plan into VT529 are also eligible for the tax credit on the contributions portion of the rollover.
- Note: The funds must remain in the VT529 plan for the remainder of the tax year to claim the tax credit.
For details and examples of the Vermont tax credit guidelines, see the Vermont Department of Taxes Technical Bulletin (TB-66). If you have specific questions about how the income tax advantages apply to your household, you may also want to chat with your tax preparer.
For more on saving for (and gifting) education opportunities with VT529, plus details on the many benefits of the VT529 plan, visit: