529 Plans are exclusively designed for the parents, who want to secure the higher studies of their children. By opting for this plan, you can start saving early and continue with the plan thoroughly. It is one of the most convenient as well as affordable mode of savings for college that is followed by most of the families. One of the greatest benefits of this type of policies is that you get to enjoy a host of substantial tax benefits. Moreover, the different states offer a wide range of features and benefits to help the families financially so that they can reach their college saving goals.
If you are not quite aware of this type of plan, here are the different features of 529 Plan -
State Tax Benefits – Apart from the conventional benefits that are available with this plan, the individual states, too, offer some additional tax benefits. Make sure you ask the concerned authority in your state what are the significant benefits that they offer. These may include income exemption on withdrawals or upfront deductions for your contributions. You can do a thorough research online in order to find out what special benefits the residents of the state receive for opting for a 529 plan. If you find that there is no such benefits, try out getting a 529 plan when it is on offer.
Federal Tax Benefits – the reason why 529 plans are so very popular among the parents is that it offers unbelievable range of income tax breaks. Even though the contributions that you make, are not deductible from the final federal tax return, the investment becomes tax-deferred. In fact, the tax-free treatment was made mandatory with the help of the Pension Protection Act of 2006.
Low maintenance – Another key reason why these 529 plans are so immensely popular with the parents is that it offers a low maintenance. After you have decided which plan you would buy out, you just need to fill out a simple enrollment form with certain basic information and make your contributions; or else, you can also opt for a automatic deposit system. After that, you really don't need to worry about it. The continuous investments of the account will be handled by the plan itself and you don't need to get involved.
Flexibility – The best thing about 529 plan is that it offers absolute flexibility, that is you might shift to a different plan like relevant life policies or in any other option of the 529 plan, itself, every year or you might also shift to the 529 plan of a different state in case you are moving out of the current state.