The South Carolina 529 College Savings Plan
The state of South Carolina's 529 College Savings Plan- FutureScholar - is managed by Columbia Management a division of BankAmerica. For South Carolina residents it offers one very clear advantage to any other 529 plan a South Carolina Resident may be considering - a deduction from your South Carolina state income taxes. Note- Not a deduction on your federal return.
Contributions to the FutureScholar program work much like a traditional IRA deduction on your South Carolina income taxes, contributions reduce your taxable income. With the realatively flat income tax rates in South Carolina this means most residents will save 7% for any contribution made to their FutureScholar accounts. For example, if you are a South Carolina resident and contribut $10,000 to a FutureScholar account for your child or grand child you will recognize savings of $700 when you file your state income tax return (this will, unfortunately, also reduce your deduction for state income taxes paid on your federal return if you itemize deductions).
Like all 529 college savings accounts the investments in your account will grow tax deferred and currently can be withdrawn tax free to pay qualified education expenses. While there is a sunset provision for tax free withdrawals in 2010, 529 plans have become so popular that Congress may well extend this tax break, and even if they do not, the portion of the withdrawals representing investment gain would be taxed at the students income tax rate.
529 plans also have some features that make them useful in developing an estate plan. You and a spouse can both contribute, allowing contributions of up to $12,000 each without triggering a gift tax return and you can make up to a five year contribution in one year or up to $120,000 for a married couple if they make no other gifts to the student during that period of time, and if you die before the five year period has passed a prorated portion of the gift will be includable in your estate. Many worry about moving large sums of cash from their personnal assets, however the contributor retains control of the assets and can even reclaim (withdraw) the assets themselves subject to taxes and a 10% penalty on the earnings portion of the withdrawal.
South Carolina residents can also establish a 529 plan directly, without a financial intermediary, and invest in the mutual funds offered in the plan with no sales charge (commision). The forms needed are available on the website, FutureScholar.com.
With college costs rising at about twice the reported CPI, an early start is essential. If you are a South Carolina resident you should consider this college savings option. For more information visit FutureScholar.com.
Technorati Tag SC 529 College Savings Plan
Contributions to the FutureScholar program work much like a traditional IRA deduction on your South Carolina income taxes, contributions reduce your taxable income. With the realatively flat income tax rates in South Carolina this means most residents will save 7% for any contribution made to their FutureScholar accounts. For example, if you are a South Carolina resident and contribut $10,000 to a FutureScholar account for your child or grand child you will recognize savings of $700 when you file your state income tax return (this will, unfortunately, also reduce your deduction for state income taxes paid on your federal return if you itemize deductions).
Like all 529 college savings accounts the investments in your account will grow tax deferred and currently can be withdrawn tax free to pay qualified education expenses. While there is a sunset provision for tax free withdrawals in 2010, 529 plans have become so popular that Congress may well extend this tax break, and even if they do not, the portion of the withdrawals representing investment gain would be taxed at the students income tax rate.
529 plans also have some features that make them useful in developing an estate plan. You and a spouse can both contribute, allowing contributions of up to $12,000 each without triggering a gift tax return and you can make up to a five year contribution in one year or up to $120,000 for a married couple if they make no other gifts to the student during that period of time, and if you die before the five year period has passed a prorated portion of the gift will be includable in your estate. Many worry about moving large sums of cash from their personnal assets, however the contributor retains control of the assets and can even reclaim (withdraw) the assets themselves subject to taxes and a 10% penalty on the earnings portion of the withdrawal.
South Carolina residents can also establish a 529 plan directly, without a financial intermediary, and invest in the mutual funds offered in the plan with no sales charge (commision). The forms needed are available on the website, FutureScholar.com.
With college costs rising at about twice the reported CPI, an early start is essential. If you are a South Carolina resident you should consider this college savings option. For more information visit FutureScholar.com.
Technorati Tag SC 529 College Savings Plan
Labels: 529, college savings, taxes
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