The South Carolina 529 College Savings Plan
The state of South Carolina's 529 College Savings Plan- FutureScholar - is managed by Columbia Management
a division of BankAmerica. For South Carolina residents it offers one very clear advantage to any other 529 plan
a South Carolina Resident may be considering - a deduction from your South Carolina state income taxes. Note-
Not a deduction on your federal return.
Contributions to the FutureScholar program work much like a traditional IRA deduction on your South Carolina
income taxes, contributions reduce your taxable income. With the realatively flat income tax rates in South
Carolina this means most residents will save 7% for any contribution made to their FutureScholar accounts. For
example, if you are a South Carolina resident and contribut $10,000 to a FutureScholar account for your child or
grand child you will recognize savings of $700 when you file your state income tax return (this will, unfortunately,
also reduce your deduction for state income taxes paid on your federal return if you itemize deductions).
Like all 529 college savings accounts the investments in your account will grow tax deferred and currently can be
withdrawn tax free to pay qualified education expenses. While there is a sunset provision for tax free withdrawals
in 2010, 529 plans have become so popular that Congress may well extend this tax break, and even if they do
not, the portion of the withdrawals representing investment gain would be taxed at the students income tax rate.
529 plans also have some features that make them useful in developing an estate plan. You and a spouse can
both contribute, allowing contributions of up to $12,000 each without triggering a gift tax return and you can
make up to a five year contribution in one year or up to $120,000 for a married couple if they make no other gifts
to the student during that period of time, and if you die before the five year period has passed a prorated portion
of the gift will be includable in your estate. Many worry about moving large sums of cash from their personnal
assets, however the contributor retains control of the assets and can even reclaim (withdraw) the assets
themselves subject to taxes and a 10% penalty on the earnings portion of the withdrawal.
South Carolina residents can also establish a 529 plan directly, without a financial intermediary, and invest in the
mutual funds offered in the plan with no sales charge (commision). The forms needed are available on the
website, FutureScholar.com.
With college costs rising at about twice the reported CPI, an early start is essential. If you are a South Carolina
resident you should consider this college savings option. For more information visit FutureScholar.com.
Coverdell Education Savings Accounts
I have written a couple of times about 529 college savings plans. Another alternative is the Coverdell Education
Savings Account or ESA. While there are unique advantages to 529 saving plans the Coverdell ESA is a college
savings vehicle you should know about.
Coverdell ESA's allow contributions of up to $2,000 per year that while not tax deductible, do grow tax free, and
earnings remain tax free for qualified education expenses that include secondary schools (private, religious,
etc.). The range of investments is generally larger than that offered by 529 plans which are run by mutual fund
companies. Any IRA custodian can also offer Coverdell ESA's and companies like Shwab and Vanguard offer
these accounts. With a self directed account you can choose from stocks and bonds in addition to mutual funds,
so your portfolio can be managed with greater flexibility.
To make contributions a couple's adjusted gross income must not exceed $220,000, or $110,000 if you are
single. To qualify for tax free withdrawals the money must be spent for qualified education expenses before the
beneficiary turn 30 years old, however you can change the beneficiary to another family member once per year.
The beneficiary must be under age 18 unless the beneficiary is a special needs child. Contributions from all
donors cannot exceed the $2,000 per year cap.
With the rising cost of educating our children outstripping the general rate of inflation saving for college becomes
more and more imperative. Coverdell ESA's are another account you should consider.
Oak Street Advisors
1902 Oak St
Myrtle Beach, SC 29577
843.946.9868
The state of South Carolina's 529 College Savings Plan- FutureScholar - is managed by Columbia Management
a division of BankAmerica. For South Carolina residents it offers one very clear advantage to any other 529 plan
a South Carolina Resident may be considering - a deduction from your South Carolina state income taxes. Note-
Not a deduction on your federal return.
Contributions to the FutureScholar program work much like a traditional IRA deduction on your South Carolina
income taxes, contributions reduce your taxable income. With the realatively flat income tax rates in South
Carolina this means most residents will save 7% for any contribution made to their FutureScholar accounts. For
example, if you are a South Carolina resident and contribut $10,000 to a FutureScholar account for your child or
grand child you will recognize savings of $700 when you file your state income tax return (this will, unfortunately,
also reduce your deduction for state income taxes paid on your federal return if you itemize deductions).
Like all 529 college savings accounts the investments in your account will grow tax deferred and currently can be
withdrawn tax free to pay qualified education expenses. While there is a sunset provision for tax free withdrawals
in 2010, 529 plans have become so popular that Congress may well extend this tax break, and even if they do
not, the portion of the withdrawals representing investment gain would be taxed at the students income tax rate.
529 plans also have some features that make them useful in developing an estate plan. You and a spouse can
both contribute, allowing contributions of up to $12,000 each without triggering a gift tax return and you can
make up to a five year contribution in one year or up to $120,000 for a married couple if they make no other gifts
to the student during that period of time, and if you die before the five year period has passed a prorated portion
of the gift will be includable in your estate. Many worry about moving large sums of cash from their personnal
assets, however the contributor retains control of the assets and can even reclaim (withdraw) the assets
themselves subject to taxes and a 10% penalty on the earnings portion of the withdrawal.
South Carolina residents can also establish a 529 plan directly, without a financial intermediary, and invest in the
mutual funds offered in the plan with no sales charge (commision). The forms needed are available on the
website, FutureScholar.com.
With college costs rising at about twice the reported CPI, an early start is essential. If you are a South Carolina
resident you should consider this college savings option. For more information visit FutureScholar.com.
Coverdell Education Savings Accounts
I have written a couple of times about 529 college savings plans. Another alternative is the Coverdell Education
Savings Account or ESA. While there are unique advantages to 529 saving plans the Coverdell ESA is a college
savings vehicle you should know about.
Coverdell ESA's allow contributions of up to $2,000 per year that while not tax deductible, do grow tax free, and
earnings remain tax free for qualified education expenses that include secondary schools (private, religious,
etc.). The range of investments is generally larger than that offered by 529 plans which are run by mutual fund
companies. Any IRA custodian can also offer Coverdell ESA's and companies like Shwab and Vanguard offer
these accounts. With a self directed account you can choose from stocks and bonds in addition to mutual funds,
so your portfolio can be managed with greater flexibility.
To make contributions a couple's adjusted gross income must not exceed $220,000, or $110,000 if you are
single. To qualify for tax free withdrawals the money must be spent for qualified education expenses before the
beneficiary turn 30 years old, however you can change the beneficiary to another family member once per year.
The beneficiary must be under age 18 unless the beneficiary is a special needs child. Contributions from all
donors cannot exceed the $2,000 per year cap.
With the rising cost of educating our children outstripping the general rate of inflation saving for college becomes
more and more imperative. Coverdell ESA's are another account you should consider.
Oak Street Advisors
1902 Oak St
Myrtle Beach, SC 29577
843.946.9868
 |  |  |  |  |  |  |
 |
 |
 |
 |
 |