How does the Virginia 529 Plan Work?
What is a 529 plan ? In a 529 account, your money can grow free from federal taxes and be used to fund qualified higher education expenses at eligible educational institutions nationwide. Virginia taxpayers enjoy the additional benefit of a state income tax deduction on contributions to their Virginia529 accounts.
Which Virginia 529 plan is the best?
Invest529, Virginia’s direct-sold college savings plan is available to residents of any state, and offers low fees, diverse investment options and tax benefits for residents. In Savingforcollege.com’s latest quarterly rankings, this plan ranked in the top 10 for 1-year, 3-year, 5-year and/or 10-year performance.
How do I open a 529 plan in Virginia?
Gather information you will need to open your account : Account owner’s name, address, state-issued identification information (such as a driver’s license) and Social Security number. Beneficiary’s name, address, Social Security number and date of birth. Designated survivor’s name, address and Social Security number.
What are the risks of a 529 savings account?
Disadvantages of using a 529 plan to save for college 529 plan funds must be spent on qualified expenses to avoid tax and penalty. Non -qualified distributions are subject to income tax and a 10% penalty on the earnings portion of the distribution. 529 plans owned by a third-party can hurt financial aid eligibility.
What’s better than a 529 plan?
A 529 savings plan is one of the best ways to save for a child’s college education, but there are alternatives. Custodial UGMA and UTMA accounts can be used for purposes other than education. Roth IRAs have tax advantages similar to 529 plans and they don’t count as assets for financial aid purposes.
Can you lose money on a 529 plan?
You don’t lose unused money in a 529 plan . The money can still be used for post-secondary education, for another beneficiary who is a qualified family member such as younger siblings, nieces, nephews, or grandchildren, or even for yourself.
Is Virginia prepaid tuition a good deal?
This represents an annualized gain of between 6.5% and 10%. The prepaid tuition plan is a good deal only if he attends the most expensive public college in Virginia . However, to attend a Virginia private school, the VPEP will pay a total of $26,175 which represents an annual 6.4% gain. Prepaid programs are not safe.
Can I deduct my 529 contributions in Virginia?
Virginia529 account owners who are Virginia taxpayers may deduct contributions up to $4,000 per account per year with an unlimited carryforward to future tax years, subject to certain restrictions. Those age 70 and above may deduct the entire amount contributed to a Virginia529 account in one year.
Is VA 529 worth it?
Since residents of Virginia can deduct contributions they make to the Virginia 529 plan (and cannot deduct contributions if participating in other state plans), VA 529 is the best option for residents. Despite being the best option, and being ranked as a top plan nationally, it still has plenty of flaws.
Does VA 529 pay for room and board?
Since room and board costs are qualified expenses, that means students with an on-campus meal plan can pay for it with 529 funds.
Can grandparents deduct 529 contributions in Virginia?
Yes, grandparents can claim the deduction for contributing to a 529 if they live in one of the 34 states that offer a state income tax deduction for 529 college-savings plan contributions . In Utah and Virginia , the owner of a 529 account can also deduct the contributions other people make to the account.
Does Virginia 529 cover room and board?
The Virginia Prepaid 529 plan only covers tuition and mandatory fees charged by higher education institutions. The Prepaid 529 does not cover room and board , books, supplies, and other qualified higher education expenses.
Why a 529 plan is a bad idea?
A 529 plan could mean less financial aid. The largest drawback to a 529 plan is that colleges consider it when deciding on financial aid. This means your child could receive less financial aid than you might otherwise need.
Is a 529 better than a mutual fund?
Income and Capital Gains Taxes. No tax ( 529 plans) is better than some tax ( mutual funds ). Mutual funds investing in stocks usually make year-end capital gains distributions, whether you want them or not. And when you liquidate the fund to pay college expenses, the appreciation is taxed.
Does having a 529 hurt scholarship?
Find a 529 Plan. Any parental assets beyond that amount will reduce a student’s aid package by up to a maximum of 5.64% of the asset’s value. So, if a parent’s 529 account exceeds the Asset Protection Allowance by $10,000, his child’s financial aid award could be reduced by as much as $564.