Treasurer McCord: only days remain to save on taxes by saving for college
Last Modified: February 20. 2013 12:00AM
Pennsylvanians who open or contribute to a PA 529 account by December 31 can take advantage of a state income tax deduction and gift tax exclusion, he said.
‚??This is a busy time of year for families with holiday celebrations and New Year‚??s gatherings, but it is also a time to make year-end tax plans. Contributions to a PA 529 account before the end of the year can reduce a family‚??s 2012 state taxes by hundreds of dollars per child. I hope families keep that in mind and remember every dollar saved now is one less you or your child will have to pay out-of-pocket or use to pay off costly student loan interest down the road,‚?Ě Treasurer McCord said.
According to Treasurer McCord, taxpayers can deduct up to $13,000 per beneficiary in PA 529 contributions from Pennsylvania taxable income on their state tax returns for 2012. Married couples filing jointly can deduct up to $26,000 per beneficiary if each spouse has taxable income of at least the amount deducted. Additionally, family and friends can contribute up to $65,000 in a single year ($130,000 for a married couple filing jointly) for each beneficiary without incurring federal gift tax consequences (assumes no other gifts in the next four years).
PA 529 savers receive even more valuable tax advantages, the Treasurer noted. Earnings in a 529 plan are not subject to yearly taxes as they grow, and when used for qualified expenses such as tuition or room and board, earnings are tax-exempt when withdrawn.
‚??Last year, Pennsylvanians saved more than $17 million on their state income taxes as a result of investing in a 529 plan,‚?Ě said Treasurer McCord. ‚??Anyone can contribute ‚?? family members, friends, and neighbors ‚?? and take advantage of this deduction. Simply visit www.PA529.com before December 31.‚?Ě
To encourage more families to start saving for college in a tax-advantaged way, the McCord Treasury is offering free enrollment ‚?? a $50 savings ‚?? for all new PA 529 Guaranteed Savings Plan (GSP) accounts opened before December 31 at www.PA529.com. Use code MAXTAX when prompted. There is no enrollment fee for Pennsylvania‚??s other 529 plan, the PA 529 Investment Plan (IP).
The primary difference between the two plans is the way savings grow. Growth in the PA 529 GSP is based on tuition inflation. For example, if you save enough for a semester at one of Pennsylvania‚??s State System of Higher Education universities today, you will have enough for a semester there in the future ‚?? no matter when or how much tuition has gone up in the meantime. Returns in the PA 529 IP are based on financial market performance. The PA 529 IP features low fees and more than a dozen conservative and aggressive investment options from Vanguard, one of the nation‚??s largest financial services companies.
The Pennsylvania 529 College Savings Program is a tax-advantaged way to help make college more affordable and accessible for Pennsylvania families. Administered by the McCord Treasury, the program currently serves over 167,000 accounts with more than $2.5 billion in assets. Since the program‚??s inception in 1993, more than 20,500 students have saved for college with a PA 529 plan and benefited from over $64 million in earnings.
A PA 529 plan can be used at a wide range of schools ‚?? from The Pennsylvania State University and University of Pittsburgh to trade and career schools like Empire Beauty Academy and McCann School of Business.
To learn more, or to contribute to or open a PA 529 account, visit www.PA529.com or call 1.800.440.4000.