529 Plan New York
August 20th, 2005
Question: What exactly are the tax benefits for investing in the New York State 529 Plan?
Answer: I quote from their website:
“New York’s 529 College Savings Program Direct Plan offers numerous tax incentives that make it a very attractive way to save money for college for a child, grandchild, friend, or other relative. A full discussion of the federal and New York State tax treatment of contributions and withdrawals is included in the Program Brochure and Tuition Savings Agreement.
Federal income tax benefits. Your assets grow tax-deferred, and withdrawals are exempt from federal income tax, as long as they’re used for qualified higher education expenses.*
State income tax benefits. You’ll get a New York State income tax deduction of up to $5,000 ($10,000 for married couples filing jointly) for contributions if you are a New York State taxpayer. If you are a resident or taxpayer of another state, you should consider whether that state offers a 529 Plan with tax advantages or other benefits that are not available through this Program. (Note that deductions are subject to recapture upon withdrawal from the Program other than to pay qualified higher education expenses or in respect of the death or disability of the beneficiary.)**
Gift tax incentive. Generally, if your contributions to an account for a beneficiary together with all other gifts by you to the beneficiary, including contributions to all non-Program 529 plans for the beneficiary, do not exceed the federal annual exclusion amount of $12,000 per year ($24,000 if you are married and elect to split gifts with your spouse), such contributions will not be subject to the federal gift tax or generation-skipping transfer tax. If this annual exclusion amount is exceeded, a contributor may elect to apply the contribution against the annual exclusion equally over a five-year period while filing a gift tax return for the year in which the gift was made. This option is applicable only for contributions up to five times the available annual exclusion amount in the year of the contribution. For example, for 2006, the maximum contribution that may be made using this rule would be $60,000 (or $120,000 for spouses electing to split gifts). You should consult a qualified tax advisor.*** “
Childrens College Fund
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