Advice from 9 Year Mortgage on 529 College Saving Plans
It might come as a surprise to some that the amount of money a family can potentially save through state taxes for college savings varies tremendously on the location of the person. Although many people believe 529 plans seem to be the best way to save money for their children’s future education. However depending on where a person lives can determine if this plan is worth investing in.
According to Paul Curley, the director of college savings research in Boston, he explains that those who invest in 529 plans make only about a third of what they contribute to the state sponsored plan in the long run.
And while a majority of states offer a tax deduction plan, there are states that do not such as Virginia. A good example of the extreme differences of the states and their tax benefits; In Maine, a couple that has only one child gets annual write offs of about $250. In comparison, a couple in Pennsylvania gets around $26,000. You should go see for yourself the different 529 plans and how different the benefits are in each state. On savingforcollege.com, Joe Hurley tracks these 529 plans so you can see for yourself what they have to offer.
In many states such as Kansas, there is an annual deduction cap for the 529 plan that doubles depending on the amount of children a couple has. Again in contrast other states such as Utah, Indiana and Vermont of have credits they give instead of deductions for those invested in the plans. Then there are the states that do not offer any tax benefits at all such as California, Hawaii and Minnesota. But is this a good thing? All of these states have very high tax rates despite not having tax on personal income.
So what are the problems with 529 plans? Its simple, the benefits linked to a 529 plan are based on the taxpayers state that is sponsoring it; therefore they can stop people from investing in better 529 plans. There are of course states such as Arizona, Maine, Kansas, Pennsylvania and Missouri that allow their taxpayers to have the choice of which 529 plan to invest in while continuing to receive their own states deduction.
Wrapping it up with 9 Year Mortgage
In conclusion, it’s important that we think about where our money is really going before we ever spend or invest in anything. Always think to yourself about what the benefits are of each and every financial decision that you decide to make. 529 plans can be a great investment for your child’s future education if done with thoughtful consideration and research, because there are always downfalls to financial investments that need to be analyzed beforehand.