- May 8, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Concerns about Tax Deductions and College Savings for Kids
I am currently living in a state where tax deductions are not very generous. My grandparents mentioned that they had started something for the kids, but they have not disclosed what it is or how much is available for each child. With a limit of $10,000 per year per child, I am worried that the potential benefit of tax-free growth may be restricted, and reaching the maximum of $40,000 per child could be challenging.
## Financial Planning for College Education and Debt Repayment
Additionally, my children are only a decade away from college, as my spouse is a doctor. His years of schooling and training have left us with substantial student loan debt at a high interest rate of 6.5%. While we could pay off the debt, we have been sticking to the minimum payments in hopes that his research might qualify for some form of loan repayment assistance, which is separate from income-based loan forgiveness programs.
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AI Legalese Decoder: Simplifying Legal Jargon
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****** just grabbed a
529s are nothing like opening credit cards to get a free tote bag and $100 or whatever your friends are after. It took me 5 minutes to set up a 529, set up auto deposits, and select a basic index fund. Not a lot of work. It’s now set it and forget it for 18 years if I want to. Your return on the 529 would be the same/slightly better than the loan interest rate so your call on the primary focus but any money saved is better than nothing. That 40k number per kid number is totally incorrect btw, there is no annual cap on college payments.
I believe the $10k limit only applies to K-12 education expenses. No limits on college.
The 10k limit is to pay for K-12 private school. There is no limit on withdrawals for college expenses.
If you invest a chunk of money for 10 years it’ll probably grow a bit more than 2x. If used for college you won’t pay taxes on that growth. If instead you saved in a regular brokerage you’d probably pay about 15% taxes assuming you are in the 15% LTCG tax bracket.
They’re amazing, basically a Roth IRA for college savings. At least 1/3 of my 18 year old’s is all growth that won’t be taxed and I didn’t start it until he was 6. Could only put $50 a month in at first and it’s grown quite a bit. Makes it so I won’t have to take out parent plus loans at 8 percent interest.
We have no state income tax
OP – earnings are triple tax free – no federal, state or local taxes on gains in the account, that is worth roughly 35 cents on the dollar to you.
In other words, you’d need to earn an extra 35 cents after-tax for every dollar you save in a taxable account.
I’d say you can not find a better tax free shelter used for college, than a state run 529 plan.
It’s a nice way to collect money from family.
It could be estate planning as well because you can gift up to 5 years worth into a grandchild’s 529 plan if there haven’t been any contributions prior.
I’m not sure where you got these ideas. A 529 is great plan, especially since your husband is a doctor. That mean you have a high income, which means you are going to paying for your kids’ educations. A 529 can be used to pay the entire cost of tuition, room and board, fees, equipment, books, etc. there is no 10k limit. Why in the world is the grandparents’ plan a secret? That is insane. You need to know what they are doing and how much they are giving. It could be $5000 or $500,000 – you don’t know. This isn’t some random surprise birthday gift, it something that needs meticulous planning for many years.
Totally worth it! Paid 3 years of private university for 1 with 15 years of investing and 22,500 investment and child 2 should get 3-4 years, same investment.