|[November 19, 2012]
Year-End Tax Planning: Check State Rules for Potential Triple Tax Advantages
SPRINGFIELD, Ill. --(Business Wire)--
Parents who hope to help their kids afford a college education should
consider adding this to their list of year-end tax planning moves:
Open or add to a 529 college savings plan.
Depending on their state tax laws, they might be able to take advantage
of a potential triple tax-saving bonus.
State-sponsored 529 savings plans are one of the few financial products
that can offer triple tax advantages. Earnings grow tax-free over the
life of the account, withdrawals are not taxed when used for qualified
education expenses1, and - in states that impose
personal income tax and offer offsets for contributions to that state's
529 plan - potential for reduced yearly income tax bills. Parents could
potentially realize a state tax break up to the maximum state income tax
"For parents committed to saving for their children's education, 529s
can be funded with two types of money - cash set aside from paychecks
and cash returned in the form of state tax breaks," says 529 industry
consultant Andrea Feirstein, managing director of New York-based AKF
Consulting Group. "This really can boost their efforts to build up
savings in the years before their children head off to college."
Illinois, for example, recently raised its individual income tax rate 67
percent, from 3 percent to 5 percent. The state, though, allows annual
contributions to its Bright Start College Savings Plan to be deducted
from personal income, lowering the state tax bill by up to 5 percent.
Parents who contribute$10,000 realize a "bonus" of $500 in a lowered
With the December 31st tax deduction deadline approaching, today's a
good day to invest in your child's education. Tax advantages, vary by
state. In Illinois,
Contributions of up to $10,000 for an individual, or $20,000 if
married and filing jointly, can be deducted from your Illinois state
taxable income each year
You can roll over a 529 plan account from another state and deduct the
amount that is treated as a return of the original contribution to the
old plan (but not the earnings portion of the rollover).
About Bright Start College Savings:
Start College Savings is a Section 529 education savings program
created and administered by the State of Illinois. It allows account
holders to save for the cost of education in a Bright Start College
Savings account without paying taxes on earnings.
This material is provided for general and educational purposes only, and
is not intended to provide legal, tax or investment advice, or for use
to avoid penalties that may be imposed under U.S. federal tax laws.
Contact your attorney or other advisor regarding your specific legal,
investment or tax situation.
The Bright Start® College Savings Program is administered by the
Illinois State Treasurer's Office and distributed by OppenheimerFunds
Distributor, Inc. OFI Private Investments Inc., a subsidiary of
OppenheimerFunds, Inc., is the program manager of the Plan. Some states
offer favorable tax treatment to their residents only if they invest in
the state's own plan. Investors should consider before investing whether
their or their designated beneficiary's home state offers any state tax
or other benefits that are only available for investments in such
state's qualified tuition program and should consult their tax advisor.
These securities are neither FDIC insured nor guaranteed and may lose
Before investing in the Plan, investors should carefully consider the
investment objectives, risks, charges and expenses associated with
municipal fund securities. The Program Disclosure Statement and
Participation Agreement contain this and other information about the
Plan, and may be obtained by visiting www.brightstartsavings.com
or by calling 1.877.43.BRIGHT (1.877.432.7444). Investors should read
these documents carefully before investing.
1 Withdrawals for nonqualified expenses are subject to an
additional 10% federal tax.
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