529 Plan & Grad Degree

Re: 529 Plan & Grad Degree

• jtmh2012 mod

  

  February 2016

  If I remember correctly from an earlier post, the only savings you'd have is whatever your state tax rate is on any contributions you made.  The other thing to also consider is what is your exemption limit?  I'm in Virginia and they only exempt the first $4000.
  

  
  

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• bmo88 member

  

  February 2016 edited February 2016

  jtmh2012: I live in Colorado and will have to look into the exemption limit

  
  

  ETA: I found that Colorado has a 4.68% state income tax rate. So would I essentially take how much I put into the plan and multiply it by .0468?
  

  
  

  

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• smerka member

  

  February 2016

  You can't double dip and use 529 money and take the lifetime learning credit. If you income is low enough ($130,000 or less for MFJ), the LLC will probably be better. Here's more info. https://www.irs.gov/publications/p970/ch03.html

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• bmo88 member

  

  February 2016 edited February 2016

  smerka: Combined income will be $136,000 this year....so I guess we won't qualify for the LLC.

  

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• smerka member

  

  February 2016

  Those some money in a 401k or HSA and knock that down.

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• bmo88 member

  

  February 2016

  smerka: Oh ok, didn't think about that. We contribute 15% to ROTH and 401ks. We have a PPO plan, not an HSA though.

  

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• smerka member

  

  February 2016

  You need a high deductible plan to have an HSA. Ours is still a PPO but with a high deductible.

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• bmo88 member

  

  February 2016

  smerka: Yeah, my organization offers a high deductible plan ($4,500), but we have opted for the low deductible option ($500).

  

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• hoffse member

  

  February 2016

  The 529 benefit is only for state taxes, and it just depends on what your state allows.  My state allows up to a $10K deduction per year, which is why I'm doing it - it amounts to only $500, but it's better than nothing.

  
  

  There's no federal tax benefit from the deduction side of things for making contributions.  The real benefit of 529's for most people is the tax-free growth over time.  That's a huge deal when it has 10+ years to grow.  

  
  

  H and I are way over being able to qualify for the lifetime learning credit, so this is the last deduction available to us for education expenses. I agree that for you guys, the lifetime learning credit would be way more valuable than running your school payments through a 529 at this point, and your MAGI is close enough to the limit that you could probably get it there.

  
  

  

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