Maximizing Post Secondary options
Receive a state deduction or credit if your child lives at home while enrolled over ½ time.
Rent at your house, food in your refrigerator, and internet through the home costs money. Charge the beneficiary’s account reasonable rates for these, then continue to contribute to the 529 fund, receiving a state deduction or credit.
- Loaning vs Gifting to the beneficiary. Consider how much to appropriately gift your child or grandchild. If considering a loan, remember to use at least the Applicable Federal Rates (AFR) for payback.
- Consider paying all school bills–including tuition–from the 529, presuming your beneficiary will receive a discount refund due to any scholarship. The school will send you a check back to cash out. Consider re-contributing that check amount to the account for the tax savings next year.
- Consider paying winter tuition in January instead of December, depending on your 529 balance and tax situation of the prior or next year.
State or Federal rules may only allow 2 transfers or allocation changes between accounts per year. With a new year’s 2 transfer allotment in January, Jonas can also now transfer money again to his student son from his other relatives’ accounts.
Greg has used most of his funds for his 2 children in college and grad school. He has maxed out his state tax credits for the current year. Greg waits until January 3rd, contributes the maximum allowed for the new year of tax credits, then pays tuition as soon as possible with the new deposits.
Jennifer has a tuition deadline and can’t wait until January to pay. She pays in December with her personal checking account, contributes early January to the 529 plan (receiving the tax benefit for the new tax year) then pays herself back from the 529 money mid January.
No statement or example on this site should be considered a specific recommendation for your personal situation. Investing and tax strategies each carry significant risks. Examples herein may not apply to your situation. Please consult your estate attorney, tax advisor, or financial advisor for personal advice.