Savings and Tax Planning for College: 529 and Other Plans, Education Credits, and FAFSA Strategies

Description

Most practitioners are aware that 529 plans are available to help fund college. With the unified estate credit at an all-time high, now may be the time to make a significant gift to a 529 plan. Under Section 529 (c)(2)(B), an individual can make a lump-sum gift to a 529 plan, spread over five years, without utilizing the exemption. What happens if a client "superfunds" a 529 plan and the child decides not to go to college? In certain cases, investing in a Roth IRA could be a better alternative.

Even with the IRS Data Retrieval Tool, professionals are often asked to help complete a FAFSA. More important than completion of the form itself are the strategies that can help students qualify for financial aid. Factors that have a substantial effect on how much financial aid a student receives include the number of siblings in college simultaneously, whether the child or parent own the account, and the type of account holding the funds (bank, 529 plans, savings accounts, or IRAs).

Education credits can help defray college expenses. The American Opportunity Credit (100% of the first $2,000 in qualified expenses) and the Lifetime Learning Credit (20% of $10,000 in qualified expenses) are more than compliance calculations on Form 8863. They are credits, not deductions, that can maximize a taxpayer's refund.

Listen as our panel of experts explores the planning possibilities for college bound children, including when and how best to contribute to 529 and other college saving plans, tips to maximize the education credits, and strategies for completing the FAFSA.