So with the distinct possibility that 529s will become more useful (to me) by allowing them to be spent on private K-12 education (this is in both Senate and House versions), I've been thinking about how best to utilize them. My current thought is to use them essentially as a "education HSA", but without the federal deduction on contributions.
The benefit here is that in my state (Louisiana), contributions up to $4800/couple are deductible on state taxes (so ~$300 tax savings per child). In addition, the state has a "earnings enhancement", which is basically a income based match on your contributions. In my case, it would add 2% on top of my annual contribution (no cap). Theoretically this would add about another ~$600 per year per child if I ran the full tuition amount through the 529.
In addition, I'm considering asking my parents to open accounts with my children as the beneficiaries. They would get the same benefits (tax break + earnings enhancement). Big question: Would it be ok for me to "gift" the money back to them that they contribute? Obviously if they want to actually contribute to my child's education they're free to, but assuming just legally utilizing these accounts to maximize tax benefits, this part would be optional.
Somebody smarter than me please poke holes in my logic. Obviously the best possible use of these would be to way overfund them and get the tax free earnings growth, but I don't have the means for that currently.
The benefit here is that in my state (Louisiana), contributions up to $4800/couple are deductible on state taxes (so ~$300 tax savings per child). In addition, the state has a "earnings enhancement", which is basically a income based match on your contributions. In my case, it would add 2% on top of my annual contribution (no cap). Theoretically this would add about another ~$600 per year per child if I ran the full tuition amount through the 529.
In addition, I'm considering asking my parents to open accounts with my children as the beneficiaries. They would get the same benefits (tax break + earnings enhancement). Big question: Would it be ok for me to "gift" the money back to them that they contribute? Obviously if they want to actually contribute to my child's education they're free to, but assuming just legally utilizing these accounts to maximize tax benefits, this part would be optional.
Somebody smarter than me please poke holes in my logic. Obviously the best possible use of these would be to way overfund them and get the tax free earnings growth, but I don't have the means for that currently.
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