Breaking down the College Choice 529
Editor’s Note: Victoria Rizzi is the operations manager at a local tax firm that has been serving Central Indiana for 50 years. While she’s been in this position for nearly seven years, she’s the daughter of an accountant and has been doing taxes since she was 14 (woah, right?). She has a BA in Political Science and History, and an Associate Degree in Paralegal Studies. She is currently working on her Enrolled Agent certification. So it’s safe to say, she knows what she’s talking about!
Whether you’re setting up the nursery, prepping for the first day of school, or scouting colleges, it’s never too late to explore a CollegeChoice 529 savings account. We tapped finance and tax guru Victoria to walk us through the basics.
Victoria says it’s never too late (or too soon) to check into a 529.
Why should we be looking into a 529?
A College Choice 529 plan is an excellent way to save for college or pay for private school tuition in Indiana! The money can be used to pay K-12 tuition at a private school in Indiana, or for college tuition anywhere in the world. You can put in as little or as much money as you want, and you can get a credit of 20% on your Indiana tax return every year (up to a $1500 credit on a $7500 contribution as of 2023). Also, by opening the account through collegechoicedirect.com (which is sponsored by the state of Indiana), you can open and maintain the account for FREE while still having full control over the investment options. If your child is in private school, you can funnel their tuition money through the account to get the tax credit! It only has to be in the account for a week to count!
How does it compare to other college savings options?
Unlike a savings account, the earnings on the College Choice 529 plan are tax-free when used for qualifying education. You also can't get the tax credit for any other college savings option. It is also so easy for family and friends to make gift contributions to your child's account (and claim the 20% credit on any contributions they make). Also, you can contribute the money and withdraw it as few as seven days later and still get the Indiana tax credit! Also, there is no impact on Indiana state financial aid and usually, there is very little or no impact on federal financial aid because the account is not owned by the beneficiary (student).
Do CityMoms need separate accounts for each of their kids?
Yes! You need a separate account for each child. Also, each child can have more than one account. This means grandparents can also open an account for the child, AND get the tax credit! While each tax return can only get $1500 in credit, more than one person can have an account for your child and get the credit. My dad has an account for each of his grandchildren and gets the same $1500 tax credit that I do!
What if, when the time comes, our CityKid decides on a path not covered in the 529's uses?
No problem! While the money can be used for K-12 private school tuition in Indiana OR vocational school, apprenticeship programs, college tuition, room and board, supplies, books, etc anywhere in the world, there are still options if none of those paths are right for your CityKid. You can change the beneficiary on the account at any time! That means the account proceeds can be transferred to a younger sibling or any other family member you choose that can use the money. Or, you can simply withdraw the money and you only have to pay taxes plus a 10% Federal penalty on the growth of the money. (If your child gets a full-ride scholarship to college, the 10% penalty is waived.)
Thinking of CityMoms with preteens and teens, when is it "too late" to set up or consider a 529?
It’s never too late to set up a 529! Any money you can save for your child’s education is a benefit. The earnings are still tax free, and the Indiana tax credit is available, no matter how old your child is. And the Indiana College Choice 529 makes it easy to decide which options are best for your goals and timeline. You also have the ability to change your investment options up to twice a year.
