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Keeping Track of your 529 College Plan Contributions
There are several reasons that it’s important to keep track of your 529 college plan contributions. When investing
in a pre-paid 529 college plan account overpayment means money that parents won’t be able to withdraw or to use if
the student doesn’t need it or ends up not going to college. When investing in a non pre-paid 529 college savings
account it’s important to keep track of your investment contributions because that money may be subject to an
income tax deduction in the state you live in.
This is important for any family member who is contributing to the child’s 529 college savings fund, and anyone in
the family can contribute money to the college savings fund although the contribution may not be tax deductible in
all states. Keeping track of your contributions to a child’s 529 college savings account is also important so that
you can keep track of how much money has been invested, if the investment is growing fast enough and what the rate
of growth is. After all, that account is very important to the family because the child’s future education depends
on it.
The money that parents or other family members contribute to a 529 college savings account is considered to be a
gift and as a gift that money qualifies in the tax code as part of the annual $11,000 gift tax exclusion. So, any
family member can contribute up to $11,000 annually without any taxes being applied to that money. According to the
current Federal gift tax law, parents and family members can give up to five years' worth of financial gifts, so a
total of $55,000, in one year with no tax penalties, however that person would not be able to contribute any money
to the account for four years following that year. Making a large contribution makes a lot of sense whenever a
parent or family member can afford it because the interest on such a large payment would accrue faster and in
greater amounts than interest on smaller payments, even if there were lots of smaller payments made during the
year.
If you have a personal banker or investment professional who takes care of the household’s investments make sure
that the investment professional gives you a detailed accounting of all the contributions made to the non pre-paid
529 college savings account every quarter or every month and keeps you advised of important matters pertaining to
the account. The best way to make sure the investment is doing well is to monitor it yourself, but many people find
investing confusing and prefer to leave their investments to be managed by a professional. When tax time comes
around, be sure to document all your contributions to the child’s 529 college savings program if your state allows
tax deductions on that money to make sure that those deductions are applied to your taxes.
Keeping track of your 529 college plan contributions also means staying on top of the latest developments in the
laws regarding 529 college savings plans. Make sure to stay on top of any changes in the laws regarding 529 college
plans to make sure that you don’t end up losing money. While a non pre-paid 529 college savings plan has a
relatively moderate risk level, there is still some risk and it’s best to monitor the contributions and management
of the 529 college savings plan closely to make sure that the investment is still performing well and growing under
the asset company’s management. Be sure to address any questions about the contributions to or the performance of
the 529 college savings account to the asset management company chosen by the state to administer the account
rather than to the state itself because the state is not involved in the direct management of the 529 college
savings fund.
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