Maria Giacalone-Mozo

Planning for


Working together, we choose the investment strategy that is right for you and your student, keeping in mind that generous contribution limits do exist, regardless of income level. Supporting a child’s education can be one of the most rewarding aspects of success and one of the most important elements in your financial plan. With rising inflation and the high cost of education, planning to contribute to another’s higher education may require an early start.
There are a variety of investment vehicles and tax-efficient options to contribute to the cost of higher education.
What Is a Tax-Advantaged 529 Plan? A 529 education savings plan is a gift that helps prepare your loved ones for the future. College 529 policies vary from state to state, but for the most part follow the same basic guidelines. The money you invest in a 529 account grows tax-deferred if used for qualified education expenses. That means you are getting more bang for your buck than if you invested in a taxable brokerage account or just left your money sitting in a low interest or non-interest-bearing savings account. In addition, you won’t pay state or federal taxes when and if the money is withdrawn and used for qualified expenses like college tuition.

Any U.S. citizen or legal U.S. resident 18 years old or older can open a 529 account. Only one person can own a 529 account, and there can only be one beneficiary to that account. However, one person can own multiple 529 accounts, and a beneficiary can receive contributions from multiple accounts as long as the collective amount of money in all the accounts does not exceed the state maximum limit on contributions. Approved transactions are often referred to as qualified withdrawals and vary slightly from plan to plan. If contributions go toward unauthorized purchases that do not follow guidelines then the tax deductions will be recaptured, and there may be additional monetary penalties so make sure monies in a 529 plan are being used for qualified expenses to avoid penalties.

In addition, people other than the account owner can contribute to the plan. The account owner can also change the beneficiary to one of the beneficiary’s relatives, and in case of the account owner’s death, a new account owner can be named without tax penalties. If you have more than one child you can also pass down whatever monies were unused from one child’s 529 account to their sibling or another related family member.

These plans, named for Section 529 of the federal tax code, often have tax benefits at the state level for in-state residents, this only applies to states that have an income tax though. In many cases, if the maximum deduction is surpassed in a calendar year, the deduction can roll over into subsequent years. However, each state enforces a specific total contribution limit. These limits vary and change from time to time. For more information on qualified tuition programs and expenses please visit the Internal Revenue Code website and/or speak to a certified public accountant.

*Certain conditions may apply. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible education expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible education expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. Investors should consider before investing, whether the investor’s or the designated beneficiary’s home state offers state tax or other benefits only available for investments in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. 529 plans offered outside their resident state may not provide the same tax benefits as those offered within their state.

Although UGMA and UTMA accounts are not designed specifically for college savings, they offer advantages including multiple investment options, limited tax benefits and the ability for a parent to transfer assets to a child without needing to establish a more costly trust. However, contributions to the accounts are irrevocable and parents lose control of the funds when the child becomes 18 – 21 – an age that may vary by state. We help you navigate these considerations, providing solutions tailored to your funding needs.