Saving for College? – Dan’s Tax strategy for 529 College Savings Accounts.

I wanted to share some great information I recently read about on tax benefits for 529 accounts.  You may currently be saving for your child’s college education or helping a family member save for theirs.  Many 529 accounts offer tax breaks on a state and federal level, which many American’s are now taking advantage of.  Whether you are paying for college out of a checking account or taking out a home equity line to pay tuition, these accounts can provide a great benefit.

South Carolina offers the full amount of the contribution as a deduction from income.  The interesting catch is that there is no time limit for the monies to have been in the 529 account.  So you can realistically deposit the money into the 529 one day and withdraw it to pay tuition the next, still receiving the tax benefit.  When you pay out the money there is also a tax break, through waiving capital gains taxes for earnings that you use for qualified educational expenses.  This can be worth hundreds of dollars in annual tax savings.