Tax season is underway, and with less than 50 days to the deadline, you are undoubtedly thinking about how to minimize your tax burden. As I always say, “It is not what you earn, but what you keep.” One of the ways to receive an immediate tax benefit is to invest in a state specific 529 plan. With a 529 plan, you might be able to save for college and reduce your tax bill because in many states there is an income tax deduction for contributions to a 529 plan. Not all states offer tax deductions, and I can help to advise which states offer these benefits. New York, for example, offers up to a $10,000 deduction on your NYS taxes.
I mention this because only 39% of families have a plan for paying for college prior to enrollment. Many individuals in today’s environment are graduating from top schools; however, they have six figures worth of loans and no job opportunities. Two thirds of students graduate with debt, and 2 out of 5 will delay buying a house because of student debt. If you do not have a plan and wait till the last minute, you typically will have to draw on other sources, such as retirement savings and private loans. In 2011, about 11% of families were able to use money from tax friendly 529 college savings plan to pay off college expenses. That is a very low number, which suggests that many families are either not planning ahead to save for their children’s education or are just procrastinating.
It is up to us to educate the next generation about the importance of having a solid financial plan in place and to teach our children about the importance of taking control over their finances. Having a plan will facilitate the decision making process. Getting the most from life means enjoying today and preparing for tomorrow. Today, the average family vacation costs $244 per person per day. Yet the average amount parents save for their college-bound children is $244 per month. So during this tax season, think about benefits realized today as well as tomorrow by using a 529 plan to save for future education: Today, you will receive a tax deduction; tomorrow, your children will use money tax free for educational expenses. Moreover, any interest or growth is tax free and any money used for higher education is also tax free.
Please contact John J. Fiorito at 212-785-4377 x224 to create your 2013 college savings plan. Get the most out of the situation - benefit today (less taxes) and prepare for tomorrow (tax free asset for your children’s education).
Be Prepared, Be Educated, and Be Proactive!
John J. Fiorito
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