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How do I pay for my kid's college?

Posted by Admin Posted on June 20 2017

Using a 529 Plan to Pay for Your Child’s College

A Section 529 plan is a great way to fund your child’s college education. For income tax purposes, it works like this:

 

  • no tax deduction for the money you put into the plan,
  • tax-free growth inside the plan, and
  • tax-free distribution when the money or prepaid tuition is used for college.

 

For gift-tax purposes, the 529 plan works like this: contributions to 529 plans are taxable gifts eligible for the annual gift-tax exclusion of $14,000 per donee (2017 amount), which doubles to $28,000 if your spouse consents to gift splitting.