<p>With one year before S1 starts college (fall 2015) - does it make sense to keep putting money into his 529?<br>
Better to the ESA? Just leave it in my name?? Thanks.</p>
<p>Some state will give you tax breaks on you 529 contributions but not ESA</p>
<p>Look in to fin aid treatment (if you think you qualify for fin aid). Some formulas (I can’t remember if it’s FAFSA, Profile, or something else) may treat money in a 529 more harshly than if you just kept it in your name.</p>
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<p>No, just the opposite. Some formulas will give you a break if you save in a 529 as opposed to non-529 funds in a parent’s name. Plus, if college savings is sitting in a savings, checking or investment account, the earnings will likely be subject to tax, regardless of what the money is used for. 529 earnings are tax free, if used for qualified education expenses.</p>
<p>529 is considered as parent’s asset in FAFSA or CSS profile. I don’t think they treat it more harshly than other assets.</p>
<p>Stupid question: what’s an ESA? We have 529s. I have one Junior and one eighth grader</p>
<p>^Coverdell Education Savings Account See <a href=“Coverdell education savings account - Wikipedia”>http://en.wikipedia.org/wiki/Coverdell_Education_Savings_Account</a></p>
<p>Thanks all. I like setting the money aside in the separate 529 kitty. I was just concerned somehow that would count against financial aid more than other tactics. With one year to go whatever I contribute won’t earn a whole lot in one
year so I wouldn’t be sheltering much gain at this stage. </p>
<p>You can’t make a contribution to a Coverdell once the student reaches 18 years old.</p>
<p>What, if any, contributions should someone make to a 529 once the student enters college? I was thinking, and correct me if I am wrong, that if the student gets substantial merit it might be better just to save the money so expenses such as off campus rent and food can be paid. </p>
<p>Remember that you can get a tax credit for up to $4000 in Qualified Educational Expenses paid out of pocket. 100% credit for the first $2000 and 25% for the next $2000. See irs.gov for income restrictions. I have a money market account that did not go into the 529 which can be used for QEE in order to get the tax credit.</p>
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<p>Perhaps you’re asking about this from the perspective of not paying $4000 of QEE from a 529 so that the American Opportunity Tax Credit can be fully utilized (although if “substantial merit” covers most of tuition and fees, you would need to designate some of that as taxable and covering room and board, if allowable), but for 529 purposes off campus rent and food is a qualified expense.</p>
<p>@jeannemar Thanks for that reminder. AOTC is $2500 for four years per child. Is that the one to which you refer? <a href=“You Can Get $10,000 Per Child In College Tax Credits, Thanks To The Fiscal Cliff Deal”>http://www.forbes.com/sites/troyonink/2013/01/16/american-opportunity-tax-credit-pay-for-college-and-pay-less-tax/</a></p>
<p>^^^Just remember that as of now, the AOTC is only in place through the 2017 tax year. With your S1 starting in fall 2015, you’ll get three years eligibility for the credit. Of course, Congress could always extend it as they have done in the past, but that’s far from certain.</p>
<p>@patertrium, the source tax publication for all things educational is IRS Pub 970. Taxable scholarships/grants, the AOTC and other tax credits/deductions and 529 and ESA distributions. The main thing is you can’t get more than one tax benefit based on the same expenses, they have to be coordinated. The AOTC is the most valuable of the tax credits/deductions but you can only use one of them in the same tax year. R&B is QEE for 529/ESA distributions but not for the AOTC.</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>As someone previously mentioned, depending on the state, you may be able to get a tax deduction for funds put in a 529.</p>
<p>In Pennsylvania, if I remember correctly, the money doesn’t even have to stay in the 529 plan long.</p>
<p>In other words, you can deposit up to $14,000 per taxpayer ($28,000 for married) into any 529 plan, withdraw it a few weeks later, and get a tax deduction. </p>
<p>You can do this each year the child is in college.</p>
<p>@dadinator Thank you. But alas it looks like CA does not offer that incentive. <a href=“State Section 529 Deductions - Finaid”>Your Guide for College Financial Aid - Finaid;
<p>@patertrium - Come to Pennsylvania! We’d love to have you!</p>