We're almost halfway through December. Are you feeling the holiday crunch?
Sorry, but I'm here to add to it.
As I've already nagged suggested back in November and earlier this month, you need to take care of some year-end tax tasks, too.
One of those tax moves — contributing to a youngster's 529 plan — is worth another look, especially in light of time ticking away.
529 education benefits: The tax benefits for these state-administered savings accounts are well-known. The earnings grow tax free and account distributions aren't taxed when the money is used to pay allowable education costs.
Though they were created to pay for such things as college tuition, room and board, most classroom-related fees, books, supplies and equipment, the recent tax law change opened up 529 plan options. The money now also can be used for Kindergarten through grade 12 education costs.
And you can cross state lines. You don't have to pick a plan offered by your home state. If you live in Illinois but find you like Oklahoma's 529 offering better, go for it. You can use any 529 college savings plan to pay for eligible institution expenses in any state.
Tax breaks for contributors: As for tax benefits for 529 contributors, things aren't so straightforward.
Although these accounts were created as part of the Internal Revenue Code (and the name comes from their section in the U.S. tax code), you don't get a federal tax break for contributions to a 529 plan.
However, most of the states that have these educational savings plans and state income taxes do offer tax-saving benefits at that level.
The state breaks, either a tax credit or tax deduction against the states' taxes, vary by jurisdiction. So do the deadlines for taking advantage of them.
December deadline looms: To get the benefits for the tax year, most states require you to put the money into the 529 by Dec. 31.
A handful, however, provide more time, typically into April of the next year.
Saving for College has the deadline details (and more) on 529 plan contributions in order to claim tax benefits in the 34 states and District of Columbia that offer such tax breaks.
When you get a few minutes between your gift shopping and holiday baking and card addressing and, oh yeah, work, check it out.
It could help make for happier holidays and a merrier Christmas as you juggle your year-end seasonal and tax responsibilities.
You also might find these items of interest:
- 8 ways the new tax law does — and doesn't — affect paying school costs
- Student loan repayment help soon could be part of more companies' benefit packages
- Make paying for college a family affair, with contributions from parents, kids and Uncle Sam
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