Birthdays, the holidays, and graduations are perfect opportunities to substitute a contribution for another toy or clothing. If they are a Colorado taxpayer , they also benefit from the Colorado income tax deduction on all direct contributions to a CollegeInvest account. If you have any questions, please email us at general collegeinvest. Once the aggregation of all account balances meets or exceeds this limit, additional contributions are prohibited but the account may still continue to accrue earnings. For some Account Owners, this is a significant estate planning benefit in that contributions to s are considered completed gifts, and therefore removed from their estate.
Answer: Savings can be used for a variety of eligible college-related expenses, including:. The Tax Cuts and Jobs Act of expanded the qualified use of savings accounts by allowing withdrawals for K tuition expenses. Section of the federal tax code sets the general rules of qualified tuition programs, which authorizes each state to administer its own program and determine its unique state tax treatment and other policies.
Colorado tax law remains unchanged and CollegeInvest plans can only be used for qualified higher education expenses. Any other use, including K tuition expenses, are considered non-qualified withdrawals and subject to penalties. For more information from the Department of Revenue, click here. You will need your account information, and provide the reason for the withdrawal. You may elect to have the funds sent to you the Account Owner , directly to the Beneficiary, or directly to the school. Retain documentation for your own records showing your withdrawal was used to pay for qualified higher education expenses within the calendar year.
Consult your financial advisor or tax preparer for the related tax implications of your withdrawals. Answer: Savings used to pay for qualified higher education expenses within the same calendar year are free from federal and Colorado state income tax.
State tax deductions may also be subject to re-capture in subsequent years. Assets are removed from the estate, but you retain control Learn More Details: Contributions to your account are considered a completed gift for federal gift and estate tax purposes, therefore removed from your estate. For each and as many Beneficiaries as you wish. And, you can repeat the opportunity every 5 years. If you die during the 5-year period, a pro-rata portion of the contribution is added back to your estate.
In addition, any state tax deductions for contributions may be subject to recapture in subsequent years.
You elect to withdraw all of the funds to you personally, for expenses that are not education-related. This is an example for illustration purposes only. General Information. What are the benefits of investing with CollegeInvest? Who can participate? Answer: Parents, grandparents, other relatives, even friends! Nor are there any restrictions on the number of accounts per Beneficiary. And, anyone can contribute to your account.
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When can I open a CollegeInvest savings plan? Answer: Today. What are the eligible expenses covered by a plan? What schools are eligible? Answer: Funds can be used at post-secondary educational institution participating in a student aid program administered by the U. Back to top. How do I open an account? Online or by mail. Name the Account Owner. There is no limit on the number of accounts held by an account owner. Name the Beneficiary. Name a Successor Optional.
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How much are you going to save, and how often? Select a Plan and Enroll. Beneficiary Information. What is a Beneficiary? Can parents and grandparents open separate accounts for the same student? Answer: Yes, in fact this is quite common. There are no restrictions on the number of accounts for a specific Beneficiary. Can I change my Beneficiary? Answer: Absolutely, and at any time. Just login to your account and complete the required form, or contact your plan manager directly. Is my student required to go to college in Colorado?
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Answer: No. You may use your funds at any eligible public or private college, university, community college, vocational or trade school across the country — even internationally. What if my student gets a scholarship? Investment Options. Can I change my investment options? Are there fees related to my investment choices? What is an Age-Based Option? How do I contribute to my account? Can anyone else contribute to my account? Are there minimum contribution requirements? Is there a maximum limit on Contributions?
Making Withdrawals. How can I use my savings? Can I use my savings for K expenses? How do I make a qualified withdrawal? Do I have to pay taxes on withdrawals? What if my student only wants to go less than half-time? Answer: Savings can be used for all qualified higher education expenses other than room and board. If the student reduces their full time status and receives a refund for payments you made with your account, you may re-contribute the refund to your account.
The re-contribution must be made within 60 days of receiving the refund to avoid tax penalties for an unqualified withdrawal. What if I really need that money for something other than college? Gifting and Estate Planning Benefits. For a full list of qualified education expenses, review IRS Publication You might want to spread out withdrawals over the 4 years of college.
Also, deduct any federal tax credits, like the American Opportunity Tax Credit. If you claim the credit, it will reduce the amount of your expenses that are considered qualified. Learn more about the American Opportunity Tax Credit. Facebook Twitter. Latest articles. The information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Ready to pay that tuition bill? Avoid these plan mistakes. Trap 2: Not understanding qualified expenses In order to get the benefit of federal tax-free earnings, you must use your plan money for education-related expenses.
The good news is that the IRS has a broad definition of qualified education expenses, which include: Tuition. Equipment, including computers, internet access, and computer software. Certain room and board expenses.
Ready to pay that tuition bill? Avoid these 529 plan mistakes.
Expenses for students with special needs. Examples of nonqualified education expenses include: Student loan payments. Travel costs, such as airfare to and from school. Sorority and fraternity fees. Sports and entertainment costs. Trap 3: Withdrawing too much each year You might want to spread out withdrawals over the 4 years of college. Planning to make a withdrawal?
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