What’s Up with 529 College Plans in Texas?
May 3, 2009 by admin
Filed under 529 College Savings Plans Exposed
States' 529 college savings incentives plans have become the newest way for families to save money for their children's future higher learning educational expenses. In Texas, there are two popular sections 529 college savings incentive plans that can help you save for the education your children deserve.
What Are the Two 529 Savings Incentive Plans in Texas?
The 529 savings incentive plans in Texas are known as Texas Tomorrow Funds. Separately, there are two funds: the Texas Tomorrow's College Investment Plan and the Texas Guaranteed Tuition Plan. Here is a brief overview of each plan so you can decide which one would work best for your family. But remember, you can also choose to invest in both plans if you so wish.
The Texas Tomorrow's College Investment Plan
This plan is managed by the Enterprise Capital Management group. The basic purpose of this 529 savings incentive plan is to provide a safe and secure tax-benefited investment vehicle for families who want to save for college. The Texas Tomorrow College Investment plan offers great flexibility, with a choice of over 20 different investment portfolios to choose from.
The Texas Tomorrow's College Investment plan allows your money to grow in a tax-free environment. It also allows for tax-free withdrawals when you are withdrawing earnings to be used for qualified education expenses.
What Expenses Are Covered by the Texas Tomorrow College Investment Plan?
The Texas Tomorrow's College Investment Plan covers all the basic higher education-related expenses, including tuition and mandatory fees, expenses related to room and board, textbooks and supplies, and some transportation costs. The Texas Tomorrow College Investment plan is very accessible, with easy year-round enrollment available. There are no age limits on this plan.
What Tax Benefits are Associated with the Texas Tomorrow College Investment Plan?
There are many tax benefits associated with this plan, including many federal tax benefits. Federal tax benefits for this plan include tax-free earnings, access to HOPE and Lifetime Learning tax benefits, as well as access to other favorable federal tax estate and some gift benefits.
Your Other Texas 529 Option The Texas Guaranteed Tuition Plan
The other section 529 plan available in the state of Texas is the Guaranteed Tuition Plan. The Guaranteed Tuition Plan helps families lock in the cost of a higher education today. It is a basically a prepaid plan where you can pay for your children's future college expenses at today's cost.
The plan allows you to use the benefits at any accredited institution of higher learning in the United States. The benefits of the Guaranteed Tuition Plan are protected under constitutional guarantee by the State of Texas. In most cases, earned distributions on the Guaranteed Tuition Plan are tax-free when they are used for most kinds of educational expenses.
What Expenses Does the Guaranteed Tuition Plan Cover? What about Tax Benefits?
The Guaranteed Tuition Plan covers only the basic expenses, which includes tuition and any mandatory fees. As for tax benefits, the Guaranteed Tuition Plan offers the same federal tax benefits as the Texas Tomorrow's College Investment Plan, which include tax-free earnings, access to the HOPE credit and Lifetime Learning credit, and other favorable federal tax credits.
What Are the Restrictions of the Guaranteed Tuition Plan?
There are certain restrictions on the Guaranteed Tuition Plan. For instance, the Guaranteed Tuition Plan has an age limit, available only for those newborn to 12th grade. Another restriction on the Guaranteed Tuition Plan is that it is not available for year-round investment.
Check the State of Texas web site for dates on when to enroll in the Guaranteed Tuition Plan. Also, to open a Guaranteed Tuition Plan account, you must be a citizen of the State of Texas.
