Let's just get this out there - I'm not talking about the Buffalo Bills. The only place they're going is home in three weeks when the season ends (again). No, I'm referring to those beginning or end of the semester college bills that will no doubt be finding a way into your mailboxes towards the end of the year. Now is the perfect time to take advantage of a little-known strategy to both help pay for college, and earn a little break on your taxes.
If you haven't done so already, consider making a contribution to your 529 College Savings Plan. "My child is already in college," you say. "I don't want to invest the money and lose anything." Point taken; but if you're going to be helping your children pay their college bills, consider putting a few bucks (up to $5,000 for single tax filers, $10,000 for married couples) into the 529 plan's money market mutual fund. Essentially, with cash, you can make a contribution to the plan, and then take the money back out and send it on to your child's school. By doing this, you have still helped Johnny or Sally out by paying some of their tuition. You have also created a nice state income tax deduction on the money that you put into your plan - a win-win situation!
Some things to consider:
- If living in New York State, you are eligible for a state income tax deduction. Reside in another state? Click here to find any benefits you may be eligible for.
- Multiple children in college? You need only set up one account to cover all of your kids - you simply change the beneficiary on the plan based on which child's bill you are paying for. Note: Your advisor can help you with this part - you don't have to go it alone.
- To receive the tax benefit, you have to be the owner of the plan. Anyone can make a gift to a 529 plan for a grandchild, nephew, or god-child, even if they aren't the plan owner. Only the owner is eligible to deduct their contributions on their state income tax.
- Contributions have to be made by December 31, 2013 to receive 2013's state income tax deduction.
Chuck Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).