Reduce Taxes While Saving For Education
The 529 College Savings Accounts are an excellent way to save for college and reduce taxes. 529 savings plans can be used to pay most college expenses, including tuition, mandatory fees, room and board, textbook and supplies, and equipment, such as computers, required by a college for a student's enrollment. (Transportation costs are not qualified expenses.)
Many 529 college savings accounts may be used not only to pay for a child’s education, but also for graduate school and other continuing education needs. Account contributions grow tax free and withdrawals also are tax free as long as they are used for qualified higher education expenses. Virginia offers a state tax deduction of up to $2,000 a year per account with an unlimited carryforward until all contributions have been deducted.
Distributions from many of the plans can be used at accredited colleges or universities across the country and at many higher education institutions around the world.
Parents and Grandparents can build college savings tax free for a child while maintaining control over the accounts. The owner of a Virginia College Savings Plan account holds exclusive control over the use of the account, including naming or changing the beneficiary. An account owner may contribute up to $12,000 a year, ($24,000 if married) for each beneficiary without incurring federal gift tax (if no other gifts are made to the beneficiary by the same individuals that year)
Earnings and eligible withdrawals are not taxed when used to pay college tuition and mandatory fees. Qualified distributions from Virginia's other 529 plans also are tax free.
