Student Starting College This Year? A 529 Savings Plan Might Still Help. By RACHEL ROSENTHAL/Wall Street Journal
For parents sending high-school seniors to college in the fall, here's a surprising financial tip: Contributing to a 529 plan even just months before the first tuition payment is due will qualify the account owner for a tax benefit in many states.
Adding to a 529 can lower the state taxes you owe—under certain conditions—in 34 states and the District of Columbia, according to a tally by college-planning website FinAid.org.
Make sure your plan doesn't require a minimum holding period before withdrawals to get the tax break. While most states don't require such a holding period, a handful do—like Michigan. There, the deduction of up to $5,000 per year for individuals (and $10,000 for a married couple filing jointly) is determined by subtracting distributions from the total contributions to the plan within the same calendar year. This implies you need to take the distribution in a subsequent tax year to get the deduction.
Overlooked Loophole?
Joe Hurley, founder of the website savingforcollege.com, says he wouldn't be surprised if more states add holding-period requirements because of the revenue losses states have suffered in recent years.It's possible, he says, that most states either haven't seen this as a big issue or that they remain unaware of it.
To read the entire article from RACHEL ROSENTHAL/Wall Street Journal:
http://online.wsj.com/article/SB10001424127887323869604578370882132838930.html?mod=WSJ_PersonalFinance_PF14
The superior man is modest in his speech, but exceeds in his actions. - Confucius
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