It’s the end of May and since Section 529 of Title 26 of the US Tax Code allows for “qualified tuition programs” the commonwealth of Virginia’s 529 program likes to celebrate and advertise their college savings plans. This year's benefit: essentially a one-time match! If you open a new account before the end of May(!); set up a recurring debit which has at least 1 contribution and have $50 in the account prior to the end of August, Virginia 529 will make a $50 contribution in your account.
Virginia has done something like this before (2014, I think) but they didn’t have the requirement of the recurring bank debit and they allowed more time than 7 days to open the accounts. Nevertheless, the opportunity is here for those of you who can get in front of a computer to open an account. Now, before you decide against the effort because it’s only $50. You get this match for each beneficiary and owner combination. So if you have two kids you can open at least 4 accounts, each parent to each child. That’s $200 and there is no requirement to keep the recurring debit going after August 30th. However, you should probably consider continuing your savings – college is expensive.
The advantages to 529 savings programs have improved since the new tax law that went into effect this year, 2018. Now, you can withdraw $10,000 per student per year from a 529 plan to pay for primary or secondary education. Whereas they were restricted to “qualified higher education institutions” they now have the increased flexibility and flexibility always a plus.
Additionally, Virginia offers residents a tax deduction for up to $4,000 per year on contributions to the state's 529 plans. So if you’re going to private school you can now contribute to a 529 and immediately disburse the money to the school and capture a deduction on your state taxes. Yes, Virginia state taxes are only 5.75% but that makes $230 you otherwise would have had to pay the state in taxes.
A couple people have already asked me what they can do it they already have a 529 account. The answer is that they need to open a new account. The way Invest529 is structured, each investment counts as its own account so it's easy to open up a new account, you'll just have to select an investment choice you don't already have. Make sure that account has at $50 in it by August 30th and there has been at least one bank debit (that is still active as an ongoing debit on August 30th) and you should qualify. I encourage you to read more in the terms and conditions and you can always give me a call.
So the bottom line is that if you’re saving for your children’s college or helping them pay for private school, saving in a 529 is a good plan and for a short time the Invest529 program has another incentive available, even if it is only for a week. Finally, read the terms and conditions.