|By Marketwired .||
|December 20, 2013 03:21 PM EST||
HARRISBURG, PA--(Marketwired - December 20, 2013) - With only weeks remaining in 2013, State Treasurer Rob McCord today reminded Pennsylvanians that there is still time to reduce 2013 state taxes by saving for college with the Pennsylvania 529 College Savings Program. Pennsylvanians who open or contribute to a PA 529 account by December 31 can take advantage of a state income tax deduction and gift tax exclusion, he said.
"Last year, Pennsylvanians saved nearly $19 million on their state income taxes as a result of investing in a 529 plan," said Treasurer McCord. "While this time of year is filled with holiday celebrations and making New Year's plans, I hope families keep in mind and remember it is also a time to make year-end tax plans."
According to Treasurer McCord, the state income tax deduction for 529 college savings plan contributions was increased to $14,000 per taxpayer, per beneficiary, in 2013. The annual federal gift tax exclusion amount also increased to $14,000 per person, per beneficiary. A person may elect to accelerate their gifts by contributing five years of gifts in one year without federal gift tax implications -- up to $70,000 ($14,000 x 5 years) -- and married couples filing jointly can double this amount to $140,000.
PA 529 savers receive even more valuable tax advantages, the Treasurer noted. Earnings in a 529 plan are not subject to yearly taxes as they grow, and when used for qualified expenses such as tuition or room and board, earnings are tax-exempt when withdrawn.
The PA 529 College Savings Program provides two ways to save: the PA 529 Guaranteed Savings Plan and the PA 529 Investment Plan (IP). Both plans provide flexibility to pay for college expenses at most higher education institutions across the country. The primary difference between the two plans is the way savings grow.
The PA 529 GSP is designed to help savings grow to meet the future cost of education. When used for qualified higher education expenses, PA 529 GSP contributions grow based on tuition inflation (subject to fees and premiums). For example, someone who saves enough for one semester today at a State System of Higher Education university will have enough for one semester there in the future, no matter when or how much tuition has increased in the meantime.
The second plan, the PA 529 IP, features low fees and more than a dozen conservative and aggressive investment options from The Vanguard Group, one of the nation's largest financial services companies.
Treasurer McCord recently lowered fees by up to 30 percent for the PA 529 GSP and 22 percent for the PA 529 IP, which represents a 44 percent reduction in fees since Treasurer McCord took office in 2009.
To encourage more families to start saving for college in a tax-advantaged way, the McCord Treasury is offering free enrollment -- a $50 savings -- for all new PA 529 Guaranteed Savings Plan (GSP) accounts opened before December 31 at PA529.com. Use code 2013 when prompted. There is no enrollment fee for Pennsylvania's other 529 plan, the PA 529 Investment Plan (IP).
"Higher tax deductions and lower fees make 2013 the perfect time to save -- and there is still time left," Treasurer McCord said. "Anyone can contribute -- family members, friends, and neighbors -- and take advantage of this deduction. Simply visit PA529.com before December 31."
To learn more, or to contribute to or open a PA 529 account, visit www.PA529.com or call 1-800-440-4000.
The Pennsylvania 529 College Savings Program sponsors two plans -- the PA 529 Guaranteed Savings Plan (GSP) and the PA 529 Investment Plan (IP). The guarantee of the PA 529 GSP is an obligation of the GSP Fund, not the Commonwealth of Pennsylvania or any state agency. Before investing in either plan, please carefully read that plan's disclosure statement (available at www.PA529.com or by calling 1-800-440-4000) to learn more about that plan, including investment objectives, risks, fees, and tax implications.
Carrie Fischer Lepore