529 plans are designed to help us save for future college expenses. South Carolina residents who make contributions may also be eligible for a state income tax deduction. Anyone, no matter what state you live in, can use funds from a 529 account to pay for qualified higher education expenses.
Qualified withdrawals aren’t subject to state or federal taxes. Did you know that the 529 beneficiary can use the funds to pay for higher education expenses at eligible institutions in all 50 states? 529 accounts can also help cover higher education expenses at over 350 international institutions. You can find a list of all 529 Eligible educational institutions at savingforcollege.com and fafsa.ed.gov. What if little Johnny decides to join a rock band after graduating from high school and doesn’t go to college? As the account owner, you maintain control of the assets.
In the event your child doesn’t attend college you can change the beneficiary to another family member, leave the assets in the existing account for future use, or make a nonqualified withdrawal and buy a new Corvette. If you decide to buy the Corvette, only the earnings from a nonqualified withdrawal are subject to a 10% penalty, along with federal and state taxes at the account owner’s current tax rate. There are many more reasons to consider opening a 529 account.