Individuals may open a special
higher education savings account and benefit from states and federal
tax incentives. The account owner must designate a single beneficiary
for each account. A separate account may be opened for each child.
Married individuals whether filing jointly or separately may each
contribute up to $5,500 annually, for a total up to $11,000-MFJ.
They may also contribute $5,5000 ($110,000-MFJ) in one year and
have use the $11,000($22,000 MFJ) gift tax exclusion over the
next 5 years.
Investment earnings on 529 collage
savings plan accumulate federal income tax deferred until the
money is withdrawn. State income tax treatment on contributions
may vary. The account beneficiary can use the funds to pay for
tuition, room and board, fees, books, supplies and equipment required
for enrollment or attendance.
Beginning in 2002, distributions
used pay qualified higher educational expenses will not be taxable.
