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Our Favorite Holiday in May! – It's not what you think...

Our Favorite Holiday in May! – It's not what you think...

May 25, 2023

It's the month of May, the month that ushers in everyone's favorite holiday. No, not Mother's Day, Memorial Day, or Cinco de Mayo.

National 529 Day!

While we are big fans of all of the above; 529 Day is a dedicated time to focus on education planning for children, grandkids; even nieces and nephews. A 529 is a state-sponsored college investment account that lets you put away money today for a child's future education. For many reasons, if you have a child in your life, a 529 should probably be on your radar. Here are the main ones.

They're simple. Most 529s are incredibly easy to use. You can often set up the account you want directly online, then make one-time or monthly deposits in the amounts that fit your budget.

They provide tax benefits. 529s offer tax-deferred growth, meaning the contributions grow free of federal and state income taxes while in the account. No income tax is paid on the account's growth when you make a withdrawal, either, as long as the money is used for qualified educational expenses. Your state may offer additional tax incentives, like the ability to deduct your contributions from your taxable income.

They have high contribution limits. There are no annual contribution limits on 529s, but they are considered completed gifts for federal tax purposes. In 2023, $17,000 per donor, per beneficiary qualifies for the annual gift tax exclusion.

They're flexible. Although the money in a 529 must be used for qualifying educational expenses to avoid being taxed, account owners may change the beneficiaries on the account at any time. So, suppose you set up a 529 for an older child, and they get a scholarship. In that case, you can change the beneficiary to another child or even to yourself, and use the money for educational expenses in that way, instead.

Ready to learn more about 529s and how they fit into your budget; or open an account? We're here to help!