Contributed by Jill Johnson, Director of Marketing, Central Bancorp
Especially with recent press regarding across-the-board higher education tuition hikes, sending your kids (or yourself) to college means a lot of things, but it doesn’t mean SAVING money. Right? Well, some friendly, local accountants would like you to know that there is, in fact, a smarter way to fund a valuable education.
The CPA firm Stockman Kast Ryan and Company has some good advice regarding a nifty tax tool, the Section 529 College Savings Plan. This plan can be used to reduce your Colorado income tax and offers a variety of benefits, including:
- Freedom from the AGI (Adjusted Gross Income) limitations imposed on tuition payment deductions.
- Control of the account, which allows the custodian to ensure it is used by the beneficiary for educational purposes.
- The income earned in a §529 plan is tax-free as long as it is used for educational purposes
- Distributions from a §529 plan can be used for a wide range of educational expenses, including college or graduate school tuition, fees, books, supplies, computers (2010 only), and room and board.
- In addition, contributing to a Colorado §529 plan entitles you to a Colorado Income Tax deduction with tax savings equivalent to 4.63% of the contributions made.
Even if a current college tuition or room and board payment is due in January, 2011, a contribution into a Colorado approved §529 plan today can be withdrawn immediately thereafter resulting in a Colorado income tax deduction. With spring semester college costs potentially as high as $25,000, the resulting Colorado income tax savings could be meaningful. Of course, there are certain compliance requirements. Contact SKR to learn more by visiting their website at www.SKRCO.com.
SKR also provides a tax planning resource guide, which you can access by clicking here.
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