The tax-free retirement accounts yesterday and the two tax-advantaged savings accounts we'll talk about give you an instant double-digit return on your money through saving on income taxes.
In this post, you'll learn the facts about 529 plans and Health Savings Accounts and how to use these tax free investment options to save thousands.
Saving money on taxes is easy with tax-advantaged accounts and TurboTax software. It's the online tax tool I use each year and easy to get all the tax savings you deserve.
529 savings plans offer some of the best tax savings in the list of tax-advantaged accounts. Whereas an IRA gives you an instant tax savings and tax-free investment growth until you withdraw the money.
A 529 plan is special investment account allowed by a state or educational institution. The reason why it’s called a 529 plan is for the section of the tax code under which it’s formed.
You will still have to pay federal income taxes on your 529 contributions but most people get a state tax deduction. The other tax benefits, tax-free growth and withdrawals, makes 529 accounts the perfect way to save for education.
529 accounts are typically limited to U.S. citizens or legal residents that are at least 18 years of age or with parental consent. A trust, estate or another organization can also set up a 529 account but must have a social security number or tax ID.
The list of qualified expenses for which you can use 529 money is fairly broad. Generally you can use it for tuition, room & board, any fees set by the school, books and supplies.
If the beneficiary gets financial aid or a scholarship, then the amount of qualified expenses would have to be reduced and limit the amount you can pay with the 529 money.