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The Magic Number for College Savings: 529

The Magic Number for College Savings: 529

The Magic Number for College Savings: 529

It is no secret that a college degree still has great value in the job market. But the same degree that cost just a few thousand dollars years ago, now has skyrocketed. According the College Board, a non-profit organization dedicated to expanding access to higher education, those costs may be way beyond the average family’s budget.

Last year, the average cost for one year at a state public college or university was $25,290. The Board further reports that the average cost for one year at a private college or university was $50,900. Those costs include tuition, textbooks, fees, housing, meals, transportation and more. If you have children of grandchildren, and if you are an average income household, how will you manage to fund their education?

One consideration might be a 529 plan. A 529 plan is a tax-advantaged savings plan for future education costs. Contributions are made with after-tax dollars. Earnings grow tax-free and are free from federal income tax when used for qualified education expenses. The good news is that all of the above-listed college expenses qualify.

And there is even more good news: The federal gift tax exclusion applies to 529 plans, and allows a contributor to give up to $15,000 per year, per beneficiary. Further, here in Louisiana, deposits to a 529 plan are deductible from the Louisiana state taxable income up to a maximum of $2,400 per year, per account, and any unused portion may be carried forward to subsequent tax years on individual returns. There is a lifetime maximum deposits of $500,000 combined accounts for each beneficiary.

Find out more about Louisiana’s Student Tuition Assistance & Revenue Trust (START), our state’s 529 plan, at www.startsaving.la.gov.

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