529 savings plans are an innovative way to invest with the goal of paying the costs of higher education. Named after Section 529 of the Internal Revenue Code, a 529 plan is a tax-advantaged savings vehicle designed specifically for college savers. Morningstar has rated Maryland College Inv Plan and VA CollegeAmerica in their top 5. VA CollegeAmerica has repeatedly been a top runner, while Maryland College Inv Plan is a new addition to the list. The Virginia plan is only available through a broker, so contact us today!
Morningstar - VA CollegeAmerica plan features and ratings
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529 plans offer the following benefits:
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There are no income limits or residency restrictions for account owners;
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Assets can be used at any accredited college or university nationwide;
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Assets can be used for tuition, room, certain room and board expenses, fees, books and required supplies;
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Earnings grow tax-deferred and can be withdrawn free from federal income tax if used for qualified college expenses;
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As the account owner, you (not the beneficiary) maintain control of the account;
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You can transfer beneficiary account assets from one 529 plan to another without income tax consequences subject to certain restrictions;
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You can change the beneficiary if the designated student doesn't attend college to a member of the family without incurring penalties;
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Your money is professionally managed;
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You can invest as little as $25, or as much as $350,000, depending on each plan's requirements;
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529s even offer tax planning benefits to grandparents and others.
Tax considerations:
Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
Another key provision of the law allows families with a 529 plan account to transfer assets from one plan to another for the same student beneficiary once every 12 months free of federal income tax, provided no other such transfers have occurred on behalf of the beneficiary.
Contribution limits:
There are no limits based on income levels to contributions in 529 college savings plans. Minimum contribution limits are generally low and are set by the state offering the 529 plan. Maximum contribution limits - and how they are calculated - vary from plan to plan. The federal tax law requires that states set reasonable contribution limits based on the amount of money that would be necessary to cover the total cost of higher education for a beneficiary. In general, though, contribution limits currently range from $100,000 to $350,000 per beneficiary for the lifetime of the account. However, these limits can increase or decrease from year to year to adjust for the changing costs of higher education.