TOPEKA, Kan. (KSNT) – A 529 Plan is a way to stash money away to help pay for your child’s education expenses. Many Kansans don’t even know the tool exists.
For Patricia Roberts, her son Ben’s graduation will mark two important milestones.
“We’re going to be celebrating both his academic achievement and our achievement as a family in preparing for the cost of it,” Roberts said.
Her and her husband were able to pay for those costs with Ben’s merit scholarships and money she and her husband put away in 529 Plans, which are tax-advantaged savings accounts specifically for education.
529 Plans offer tax advantages, are easy to open and set up, and are managed by investment professionals. Tax advantages of 529 Plans include both federal and state benefits.
Your 529 investment can be used at any accredited two year or four year college, vocational school or technical school. Qualified expenses include room and board, off campus rent, groceries, computers or books.
According to the state treasurer’s office, Kansas taxpayers may take an annual deduction of up to $3,000 for single filers, or $6,000 for joint filers, from Kansas adjusted gross income for contributions into each beneficiary’s account. In 2021, an individual can give up to $15,000 per beneficiary to a 529 Plan without paying gift taxes.
Every dollar helps. Saving $100 a month over 18 years can result in a balance of over $31,000.
“As a family, we looked at our expenses and we realized how much we could save had an awful lot to do with what we were spending,” Roberts said. “We adjusted our lifestyle.”
Other families may be doing the same. Nationally, total 529 Plan contributions have increased over 11% in the past year.
“During the pandemic, we couldn’t travel, couldn’t eat out a lot,” said financial advisor Lazetta Braxton. “That’s a lot of savings that can be redeployed to goals. and education often comes at the forefront.”
After building up savings, Braxton suggests make a plan for spending it.
“A lot of people are not aware that 529 plans could not only be used for college expenses, but also private school,” she said.
That can also be applied to apprenticeships, technical schools and graduate studies.
Roberts said this is one of the proudest moments in her life that her child will graduate debt free.
For more information on the 529 Plan, click here.