If you were thinking ahead, you may have established a Section 529 plan to help pay college expenses of your oldest child. But now that child is out of school and you still have money left in the 529 plan account set up for the child.
Strategy: Roll over any unused funds into an account for another child. The rollover is completely tax-free.
Here’s the whole story: A Section 529 plan is an educational savings plan operated by one of the states. As long as certain requirements are met, there’s no income tax on the accumulation of earnings within the plan, plus qualified distributions are exempt from tax. Furthermore, contributions to the plan may be sheltered from gift tax by the annual exclusion (see below).
Choosing a plan
There are two types of Section 529 plans: (1) prepaid tuition plans and (2) college savings plans. With a prepaid tuition plan, you can lock in future tuition rates at in-state public colleges at a cur...(register to read more)
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