Tax savings is a particularly good incentive for contributing to 529 college savings plans. But while parents will wish to get the most out of the gifting and financing provided towards their children’s education, they may not be taking full advantage of their opportunities.
For example, close to a third of contributions made towards 529 college savings plans are made during the fourth quarter. However, the earlier in the year the money is contributed the longer the money will be allowed to grow without being taxed. Additionally, certain states will allow deductions to be taken on 2013 state returns for contributions made all the way up to April 15, 2014.
When someone is required to take minimum distributions from retirement plans, they may wish to move the money from one tax-deferred account to another by setting up plans for their grandchildren. Gifting can also be accelerated. As parents and grandparents can provide five years of $14,000 annual exclusion gifts at one time, a couple combined could fund an account for a single grandchild in the amount of $140,000. This would remove these funds from the estate while it would still allow the couple to control the assets until funds are actually distributed.
States overall are making deductions such as these more generous. Obviously each state will implement the deductions differently. If you are a Nevada resident, you will still wish to speak to a licensed attorney from our state to find out the latest rules. Also, such considerations need to be made based upon much more than just tax breaks.
Source: Forbes, “Maximizing 529 College Savings Plan Tax Breaks,” Ashlea Ebeling, Jan. 16, 2014