Finance & Enjoyment Blog

 

            Despite all the uncertainty with taxes for 2012, there are some tax planning items parents can do now to minimize their tax bill for the year. These tax planning items come in the form of 529 accounts and Coverdell education savings accounts.
            529 accounts provide payouts for postsecondary education, and are completely tax free. These costs include tuition, room and board, books, and supplies. Many states cap this contribution at a certain amount, but at the same time they also allow deductions for these contributions.
            Coverdell plans function similar to 529 accounts, but can also be used for costs incurred during grades K-12. There is a $2,000 limit on contributions and is unavailable to those with incomes over $190,000 if married or $95,000 if single.
            Grandparents can also make contributions to these plans as well as making direct payments for tuition that is free of gift tax even if the amount exceeds the $13,000 gift tax exclusion limit. The tuition payment also does not count against the lifetime estate tax exemption. It provides a way for grandparents to lower the size of their taxable estate while providing a great benefit for their grandchildren.
 
            If you have any questions about 529 accounts, Coverdell savings plan, or general tax issues, please give us a call at (303) 815-1100.


Posted in Your Financial House » Rules and Regulations »



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