How To Make The Most Of Your 529 College Savings Plan

With a 529 plan, saving for college has never been easier

. A 529 plan for college savings is a tax-advantaged savings program that allows an account owner to save for college free of federal and, sometimes, state income taxes. For example, New York State taxpayers can deduct up to $5,000 ($10,000 for a married couple filing jointly) of contributions to their Program account from their state taxable income each year. The account owner can use his or her 529 plan assets to help pay for tuition, certain room-and-board expenses, books, supplies, and other qualified higher-education expenses.

If your intended beneficiary decides to postpone college, you can leave your money in the account until a later date. If the beneficiary receives a scholarship or decides not to go to college, it"s easy to name another family member as beneficiary and use the 529 assets to pay for that person's education, without penalty. If no one is available to be designated beneficiary for 529 plan assets, then you may close the account and earnings will be subject to federal income tax and an additional 10% penalty, as well as state and local income taxes.

One of the biggest mistakes most people make with their

by: James Garfinkel

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