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The new Simplified FAFSA is here! Here’s a quick video with some tips that will help you get through it with a minimum of chaos and maximum of financial aid. 🔗
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529 Plans: How to get Money Out
My socials are full of prom and graduation pictures, which means it’s time to talk about how you get money out of the 529 plan to which you’ve been diligently (or otherwise) contributing.
Choosing a 529 Plan
A recent survey showed that while almost two-thirds of parents were saving for college, only about one-third are saving in a 529 plan. That’s unfortunate, since 529s are usually the best choice for savings, for a lot of reasons. On the other hand, it’s not unexpected, given that the vast array of often confusing choices can be a barrier to use. So, how do you choose?
Superfunding a 529
A contribution to your child’s 529 account is, according to the IRS, a gift to your child. This means that it’s subject to annual gift limits: any individual can gift another individual $15,000 in 2021 without reporting it anywhere or paying any taxes on it. In 2022, the limit– or exclusion amount– goes up to $16,000.
Gifting to Your 529
Tis the season to put your money where your mouth is. Ways to shift from your kids getting stuff to encouraging family and friends to contribute to your 529 savings plan.
How to Start Saving
It’s back-to-basics week for me and time to talk about getting started saving for college. If you want your children to go to college, you need to save. Period. That’s the easy part. Harder is where and how much.
Rebalancing 529 Plan Accounts
If you want to change any of your 529 account investments, now is a good time to do so. That’s because you’re allowed to make changes to your investments twice a year. If you make changes now, you’ll still have both opportunities in 2016. If you wait until January, you’ll be using one of your 2016 changes.
529 Plan Withdrawals
Strategies for using your 529 savings plan to pay for college expenses once the bills start showing up.
Matching 529 distributions to qualified expenses
So Junior is off to college and now it’s time to start paying the bills. For those who have done a good job putting money away in a 529 account, it’s important that you time your distributions in the same year as your expenses. It’s time to learn about two forms: the 1099-Q and the 1098-T.
Form 1098-T is a tuition statement that students receive from their college. It serves two primary purposes:
Documenting eligibility to claim the American Opportunity Tax Credit or Lifetime Learning Credit
Documenting that the student was enrolled in a college and that 529 withdrawals up to net cost of attendance are therefore qualified
Form 1098-T isn't filed with your taxes; instead, you use the information to file and then keep it for your records.