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529 Plans +

Each year about this time, we remind families that if they have one or more 529 plans in place, they need to make their 2018 contributions by December 31. And in Indiana there is an extra tax incentive to save for college. Like other states, there are no federal or state taxes on the earnings on the account if the money comes out of the account for eligible college expenses. However, the state of Indiana has added another powerful tax advantage: a 20% tax credit on the money contributed into the 529 plan, up to the first $5,000. If the taxpayer puts in the full $5,000, $1,000 comes right off the state tax bill!

Now here is something else to think about, the Promise Scholarship. Foundations and other philanthropic organizations increasingly have been setting up matching scholarship programs. The Promise Scholarship is one. Families are setting up 529 plans to which the scholarship provider matches part or all of what the family has contributed. Deposits also may be made in return for certain actions taken by the student (e.g., visiting a college campus, completing our College Costs Estimator to get an early look at financial aid eligibility). Talk to scholarship providers in your area to see if they have or know about such scholarship matching programs that might be available to a student.

 
 


Publication Date: December 2018

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