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Did You Know…?

December 4, 2018 | Weekly Commentary

by Jaclyn Cornelius CFP®, EA, Vice President
In line with the giving season, many of us think about giving to our children, grandchildren, nieces and nephews and possibly even to our extended family or friends’529 plans as holiday gifts. A 529 Plan is a college savings plan that offers federal tax benefits such as five-year gift tax averaging and tax-free qualified distributions (as long as the plan satisfies a few basic requirements). Some states offer state income tax incentives as well. 529 plans may also be used to save and invest for K-12 tuition in addition to college costs. You can invest in any state 529 plan, not just your own state’s 529 plan and use the dollars invested to pay for college costs at any qualified college nationwide.

If you are a Pennsylvania resident, you can receive an income tax deduction for contributions made to any 529 Plan (limits apply). If you are a New York resident, you can receive a state income tax deduction if you contribute to a New York qualified 529 plan (limits apply). An independent company (Morningstar) recently released their analyst ratings for 2018 which provided reviews of over 60 of the largest 529 Plans. End of year is a good time to discuss the idea of reviewing your existing 529 Plans and giving levels (or discussing with your financial advisor if establishing one makes sense for your situation).