A 2012 report from the U.S. Government Accountability Office (GAO) found that families who used 529 accounts were generally more affluent than those who did not. According to the Securities and Exchange Commission (SEC), all 50 states and the District of Columbia offer at least one type of 529 plan. Plans are also available through investment firms and other financial groups and entities.
There are several advantages to qualified tuition plans including:
A recent federal spending package added incentives for families to open 529 accounts—the ability to roll leftover 529 account funds into a Roth IRA. In the past, some investors declined to use 529 accounts given the uncertainty of whether a child might choose to attend college. The new rule allows beneficiaries to roll their funds into a Roth IRA should they choose not to go to college.
There are details of course—rollovers are limited to $35,000, and other restrictions. For wealthy taxpayers, a 529 account may reduce tax liability while saving for future educational endeavors.
From offices in Chicago and Cleveland, Robert J. Fedor, Esq., LLC offers strategic legal guidance to clients throughout the U.S. and abroad on IRS audits, criminal tax investigations, payroll tax issues, and more. When you have questions about individual or business tax compliance, call us at 800-579-0997 or contact us.