Families filing income tax forms may be looking for a new deduction for their taxes, and one way to earn a deduction and help send children to college is Georgia’s Path2College 529 Plan.
The plan allows parents or others to invest up to $4,000 a year for a child’s college fund and get a state tax deduction for that amount.
Here’s a question-and-answer about Georgia’s 529 Plan offered by Mitch Seabaugh, the plan’s executive director.
Who can open an account?
Parents, grandparents, aunts, uncles, godparents—anyone. You can open one for any student, including yourself as a student. You will need to provide you Social Security number to open an account.
What tax benefits does the Path2College 529 Plan have?
Contributions are eligible for a state income tax deduction up to $4,000 per year, per beneficiary, for those filing a joint return and up to $2,000 per year for those filing a single return.
Investment earnings are income tax-deferred for state and federal taxes. Withdrawals for qualified higher education expenses may include tuition, fees, books, supplies and equipment, such as computers and internet access fees, software or printers.
Like any investment, there are risks. Read the state program disclosure here.
Is it too late to qualify for a tax deduction for 2016?
Contributions made by the tax deduction deadline, this year – Tuesday, April 18 – are eligible for deduction on the preceding year's tax return.
What are the investment options?
You can chose general investments and be as aggressive or conservative, as hands on or hands off as you’d like. It’s designed to be easy-to-use, regardless of one’s level of financial expertise. You can set your own savings goals, choose when and how often you’d like to save - it can be as little as $25 per investment - and decide what qualified educational expense to spend it on.
Is the Path2College 529 Plan just for Georgia schools or can it be used for a child attending school out-of-state?
The money can be used at most schools in the United States and some abroad. Eligible institutions are those that participate in the federal financial aid program, all public institutions and most private colleges; also two-year vocational/technical educations.
Be sure to check out the Path2College College Savings Planning Calculator located under the Plan tab at www.Path2College529.com.
What if my child doesn’t use the money in my 529 plan?
If your child does not go to college, you can transfer the funds to another eligible family member and preserve the tax benefits. Should you need to withdraw the money yourself, you may so long as you pay the regular income tax plus a 10 percent federal penalty on any earnings.
For more information go to www.path2college529.com.