Map to Your Wealth LLC is Fee Only Registered Investment Adviser providing Financial Planning and Investment Advisory/Management Services
Map to Your Wealth LLC is Fee Only Registered Investment Adviser providing Financial Planning and Investment Advisory/Management Services
529 College Savings Plan is tax advantaged education savings plan. Owner (Parent or Grandparent) makes after tax contribution and names the beneficiary. Funds withdrawn and used for qualified education expenses are tax free. The new tax law added that up to $10,000 per year can be used for elementary school or secondary schools towards tuition(federal tax exempt) but states vary in providing state tax exemption.
Owner of the account is in control. Owner can change the beneficiaries any time.
New York State is one of the states that provides State Tax deduction for the 529 College Savings Plan up to $5,000 per individual and $10,000 for the couple.
Beneficiary of 529 College Savings Plan does not have to attend the college where the owner or beneficiary resides or where the account is held, can attend the college in any state.
You can change the beneficiary anytime.
Non-qualified distributions are subject to federal and state taxes and 10% penalty on earnings.
Under New York State law, distributions for K-12 tuition expenses are considered non-qualified withdrawals and will require the recapture of any New York State tax benefits that have accrued on contributions.
You can contribute any amount but in order to avoid gift tax liability, you can contribute up to annual gift tax exclusion limit per year or you have the option to contribute up to 5 times the annual gift tax exclusion amount. If you contribute 5 times the annual gift tax exclusion amount, you cannot contribute any more for a total of five years.
Annual Gift Tax exclusion amount you can gift any one is $17,000, that means a couple can give away $34,000 a year to any number of individuals and does not have to pay gift tax. You can gift more than $17,000 a year but you have to file Gift Tax Return and use the excess amount from Life Time exclusion amount.
Lifetime Federal Estate and Gift Tax exclusion amount for 2023 is $12.9 million per individual.
Estate and Gift Tax exclusion amount for New York state for 2023 is $6.58 million per Individual.
Maximum annual contribution to Tax Deferred Retirement Plans such as 401k and 403b plans is $22,500. If you are 50 or older, you can contribute an additional $7,500 in 2023.
Maximum IRA contribution to Traditional IRA or Roth IRA in 2023 is $6,500 and an additional $1,000 if you are 50 years or older. Contributions to Roth IRA are not tax deductible. Contributions to Traditional IRA tax-deduction is based upon the income.
Traditional IRA: Contribution may or may not be tax deductible based upon income. Investments grow tax deferred. You have to start taking Required Minimum Distributions once you reach RMD age. Distributions are taxable at income rate except after-tax contributions if any.
Roth IRA: Contributions are not tax deductible. Investments grow tax deferred and withdrawals are tax-free. There are no Required Minimum Distributions during the owner’s lifetime.