Thrifty Thinking: Tips to Start a 529

The prom is over, the valedictorian has given a speech, and it’s officially summertime. College is just around the corner for graduating high school seniors, which means the first tuition bills will appear at any moment.

 

To help guide families who are using 529 plans to pay for tuition, the College Savings Plans Network (CSPN) offers the following tips:

 

·         Start early: Find out from your plan how long the transfer of funds will take, whether they will send a check to you or directly to the college, and if there is anything else you should be aware of as you start the process of withdrawing funds. Once your beneficiary decides on a school, the earlier you start the process, the better.

           

·         Know before you go: Tuition due dates vary between colleges– some are not until after the add/drop period, some are before the semester starts. Check with your school to find out their due date for tuition payment, and make sure you start withdrawing your funds well in advance.

 

·         Do your homework: Make sure to check with your plan to find out what they define as a qualified higher education expenses. This generally includes tuition and fees, room and board, and the cost of books, supplies and equipment required for enrollment or attendance. If you are unsure about whether any specific item qualifies, ask your plan.

           

·         Keep a record: For tax purposes, maintain records and documentation of higher education expenses for any withdrawal you intend to treat as qualified.

 

·         Be prepared: Make sure your distributions do not exceed your higher education costs. If the distribution does not exceed the amount of the student's qualifying expenses, then you do not have to report the distribution as income on your tax return. If the distribution does exceed these expenses, then you must report the earnings on the excess as "other income" on your tax return.

 

About the College Savings Plans Network (CSPN)

Established to make higher education more financially attainable, the College Savings Plans Network (CSPN) is a national non-profit association and the leading objective source of information about Section 529 College Savings Plans—one of the most popular, convenient and tax-advantaged ways to save for college. An affiliate of the National Association of State Treasurers (NAST), CSPN brings together state administrators of 529 savings and prepaid plans, as well as their private sector partners, to offer convenient tools and objective information to help families make informed decisions about saving for college.