| A qualified tuition program (QTP) offers a significant | | | | seeking admission for any course at a member |
| tax benefit for families to support their children for | | | | college or university. Obviously, every college or |
| higher education. This program is also known as 529 | | | | university will have a different fee structure, but you |
| plan. This program is very flexible and there are more | | | | can lock a major part of future tuition costs at |
| restrictions of income for contributing to it. So it is a | | | | today's prices. Anyone can set up a plan for himself |
| useful thought for higher income taxpayers as well as | | | | or herself or for someone else. There are no |
| lower income taxpayers. So this is a very convenient | | | | limitations of income for making contributions to such |
| higher education funding tool for all. | | | | plan and there are no age limits. The person who has |
| States can establish and maintain programs which will | | | | opened the account and made a contribution is in |
| allow a view to prepay or contribute to an account | | | | charge of this account and the beneficiary does not |
| to cover educational expenses of a student at a | | | | have any access to these funds. So this is a very |
| post secondary institution. Even eligible educational | | | | good option for parents or grandparents, as they can |
| institutions can maintain a similar program. | | | | control the funds. It is considered as an asset to the |
| There are different options available under these | | | | account owner by IRS. The owner of the account |
| programs. In the first option, you cover the future | | | | can make a selection of the investment options. Even |
| increases in the tuition expenses. So if you contribute | | | | these options can be changed once in the year. |
| 10 years in advance, you are assured of covering the | | | | There is one more important benefit under this plan. |
| educational expenses for your child after 10 years. | | | | Even though the educational cost of the student is |
| Usually, such options are limited to a particular state | | | | financed under this program, the student or his/her |
| agency and they cover specific colleges and | | | | parents are eligible to claim the hope credit or lifetime |
| universities from that state. It's a good option but | | | | learning credit. |
| many agencies have discontinued such plans due to | | | | There has to be a designated beneficiary for this |
| downturns in the stock markets. | | | | plan. It can be a student or a future student. |
| In the second option, your contributions keep on | | | | However, this beneficiary can be changed by the |
| growing but there are no fixed return assured. So | | | | owner during the contributing years. |
| whatever is the amount at the end of the period | | | | What is covered under the heading 'educational |
| you planned, it is available to you to pay the tuition | | | | expenses' here? It covers the cost of tuition, fees, |
| expenses. So you may end up earning much more | | | | books and other equipment and supplies required for |
| than the cost of the educational program or even | | | | attending or enrolling at an eligible educational |
| nothing. | | | | institution. The expenses can also include reasonable |
| The tax benefits are many - the states may offer | | | | costs of room and board. |
| tax exemptions for withdrawals, there can be | | | | Remember, the total amount which is contributed to |
| deductions for contributing to the plan. In addition to | | | | a qualified tuition program (QTP) cannot exceed the |
| this the federal income tax benefits are also available | | | | amount required to finance the educational expenses |
| like differing tax on your earnings and getting tax | | | | of the designated beneficiary. As long as the |
| rate distributions while paying for educational | | | | distributions are used for paying qualified education |
| expenses. | | | | expenses, they are not taxable. If the distributions |
| There is one more option available under the | | | | exceed the educational expenses in a particular year, |
| Independent 529 plan. Under this, there are member | | | | the excess is taxable. |
| colleges and universities, private and public, from all | | | | You will receive form 1099-Q by January 31 every |
| over the country. If you open an account under this | | | | year, which will show the distributions for the |
| plan and make the contribution, you will be given a | | | | previous year and the bifurcation of return of |
| certificate which can be redeemed at the time of | | | | contributions and earnings on these contributions. |