Empower your college dreams with smart financial strategies. Explore tax breaks, investment accounts, and college-funding options.
Go back to school book smart & financially confident
Pursuing higher education is a noble endeavor, and we’re here to work with families to help them reach their financial goals while saving for college expenses. As you look into funding options, let us save you some time by providing a brief overview of popular college-funding options and resources.
Tax Breaks & Investment Accounts
- State-sponsored 529 plans let you contribute after-tax funds to use for qualified education expenses. A 529 plan offers tax-free growth and potential tax breaks for contributions. Starting in 2024, the Secure Act 2.0 will allow recipients to roll over unused funds into a Roth IRA if it benefits the same individual under certain conditions.1
- Coverdell Education Savings Account (ESA) contributions are also made with after-tax dollars and used for qualified education expenses. Contributions may be made until the beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30 or taxes and penalties may occur.2
- The Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) are all-purpose savings and investment trust accounts often used to save for college. When you add money in the trust, you are making an irrevocable gift to the child. You manage the trust assets until the child reaches the age when the trust terminates. At that point, the child can use the UGMA or UTMA funds to pay for college and anything else they require.3 Trusts involve complex tax rules and regulations, so you should consider working with a professional before establishing a trust.
- The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are two tax credits available to eligible taxpayers. The AOTC provides a tax credit of up to $2,500 per student for the first four years of post-secondary education. The LLC offers a tax credit of up to $2,000 per tax return for any level of post-secondary education, provided the taxpayer meets certain income requirements. These tax credits can help manage the amount of tax owed, making them beneficial to families seeking finds for education.4 Consult with a tax professional to understand the qualifications for tax credits before moving forward with AOTC or LLC.
Let First Entertainment Credit Union Help With College Planning
As you and your family start preparing for college, let’s build a plan together. Please reach out to First Entertainment Credit Union Financial Advisor Michelle Lee at mlee@firstent.org or 323.845.4434.
We look forward to partnering with you on your educational goals.
Michelle Lee, First Entertainment Credit Union Financial Advisor
mlee@firstent.org
323-845-4434
www.firstent.org
