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Setting Up a Section 529 Plan for an Older Child

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in Small Business Tax,Small Business Tax Deduction Strategies

Q.  We’re interested in using a Section 529 plan for our youngest child, but is it too late to set up one for our oldest son, who is age 16?

A.  No. Although you don’t have much time to build up funds for a 16-year-old, a 529 plan can still provide tax-free earnings and tax-free distributions for qualified expenses. Plus, you can claim an income tax deduction in many states, including Illinois, for 529 contributions. And if you don’t use all the funds in your older child’s account,you can transfer them tax-free to your younger child’s account. Tip: The Pension Protection Act has made permanent tax breaks for Section 529 plans that were scheduled to expire after 2010.

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