529 savings accounts are becoming more popular as an affordable way to save for college.
Here are five of the best ways to make one work for your family.1.
Save a minimum of $5,000 each yearYour family may have $10,000 to spend per year on college costs, but if you don’t have that much money, you can still save for your children’s education through 529 plans.
The average cost of attending a public four-year college in 2016 was $4,821, according to the College Board.
In contrast, the average cost for attending a private four- or five-year school was $23,852.2.
Use the same amount of money each year to help your children get the education they needThe average amount you can contribute each year is $1,200, and there are plenty of ways to take advantage of this tax break.
A 529 account is one way to contribute to a 529 plan.
This means that you can take a minimum $5 per year, or up to $20,000, in contributions, depending on your plan’s contribution limits.
A $5 contribution can help fund a tuition waiver or help your child get into college.3.
Choose a 529 account with no annual feeOne common misconception is that 529 accounts charge a $2,500 annual fee.
While the annual fee may seem high, this is actually not the case.
According to the college board, 529 accounts with no fees charge $1 per $100 in assets, and this is where the fees come into play.4.
Don’t let your children and grandchildren use your 529 accountAs you can see from the chart below, the amount you contribute to your 529 plan can affect how much your children can contribute.
The bigger your contribution, the more your child and grandchildren can contribute to the plan.5.
Use your 529 savings to buy a carFor those who want to save more for college, 529 plans are a great way to diversify their savings.
The tax deduction allows 529 plans to contribute up to 15% of your adjusted gross income for your child or grandchild to their 529 account.
You can also use the 529 savings account to buy property.
The cost of buying a car, which can be as much as $25,000 for a four-door sedan, is $2.3 million in 2016.
However, this savings account can also be used for college scholarships.6.
Use 529 savings for tuition waiversFor many families, college tuition has become unaffordable.
A number of states have started requiring students to use 529 savings.
With the help of 529 savings, families can pay for college through college tuition waivers.
To qualify for this, you have to have at least $20 million in assets to contribute and you have a minimum 529 account contribution of $10 per year.
This is a great savings tool for families who can’t afford to pay for tuition.7.
Use tax-free 529 savingsFor many, college has become too expensive for them to pay tuition.
To save for their children’s college education, 529 savings are a good option.
You don’t need to be able to contribute money to your plan to benefit from tax-exempt 529 savings in states where it is legal.
If you’re eligible, the tax-advantaged savings will allow you to defer paying taxes on your investment income for up to 20 years.8.
Keep track of your contributions to your savingsThe tax-deductible 529 savings allow you take advantage the same tax breaks and deductions that apply to your other investments.
However.
you’re not required to report your contributions on your tax return.9.
Save money on your propertyIf you’re going to college, you’ll need to save a lot for the rest of your life.
Investing in real estate can help you reduce your tax burden.
You’ll save money on property taxes, mortgage interest and property taxes that you’ll have to pay to your lender.
This will help pay for the college you want.
