Of course, consulting your tax advisor and financial planner that this method works for you is always highly recommended. Colorado 529 plans are subject to a maximum account balance of $350,000 beyond which no further contributions are allowed. 529 plan donors can front-load five years of gifts at one time, for a per-person total contribution of $70,000. Gifts to a child’s 529 plan are subject to annual federal gift limits, $14. In Colorado, the “Direct Portfolio” 529 plan offered through CollegeInvest is the commission-free plan, and the “Scholar’s Choice” plan is sold through brokers and carries sales commissions. Given the short period the funds may be in the 529 plan, tuition payers should be sure that the 529 plan account is commission-free, as the cost of a sales commission could offset some or all of the tax benefits. This method essentially nets a 4.63% (Colorado’s state income tax rate) return by the tax savings offered.
Din 529 form e full#
Because there is no minimum time period for funds to be invested in the 529 plan, tuition payments can be made as follows:ġ) A contribution for the full tuition payment (up to the maximum 529 plan contribution allowed by law) is first made to the 529 plan account,Ģ) A withdrawal request is made to have the tuition payment sent from the 529 plan account directly to the educational institutionģ) The person(s) making the tuition payment via the 529 plan now receive a full Colorado state income tax deduction for the tuition payment
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While 529 plans can be an excellent long-term savings vehicle, the Colorado plans also offer a great perk to parents and students who are about to pay or are already paying tuition and fees. The various 529 plans allow for a full Colorado state income tax deduction for contributions made to the plan by state residents, and funds withdrawn for qualified higher education expenses will be free of federal and state income taxes for any investment gains.
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I am the owner and my kids (two kids, I have two accounts with them one for each kid). Colorado’s state-sponsored college savings plans are especially taxpayer-friendly. I have a question on this 709 form, based on 529 contributions.