529 Plans – Just Another Reason Why South Carolina is a Great State
Section 529 is part of the Internal Revenue Code that provides tax-free investment funding to help families pay for ever increasing college costs. Most states have their own plans set up for their residents, however we are very lucky. South Carolina was one of the last states to implement their plan. Therefore we were able to use the other states as guinea pigs and take the best features from each plan when implementing our plan.
tax free growth
Funds invested grow tax-free and withdrawals used for college are also tax-free. Tax-free growth is the hallmark to all state’s 529 plans however it is a key feature to remember.
unlimited tax deduction
South Carolina allows taxpayers to deduct 100% of their contributions on their state income tax return. This typically reduces your South Carolina income taxes by 7% of the amount you invest. You can make a lump sum contribution or set up a systematic investment plan.
rollovers from other states
If you move to South Carolina from another state, South Carolina allows you to transfer 529 funds from your old state and take a full tax deduction for the transfer (saving you another 7% in taxes).
South Carolina is one of only 7 states where you can make a contribution up until April 15th of the following year and still claim a tax deduction for the previous year.
super funding ability
Typically you are allowed to gift $14,000 per year (or $28,000 if married) to each child without running into IRS gift-tax issues. However, South Carolina’s 529 plan allows you to make an election that enables you to put in 5 years’ worth of contributions all at once. Therefor parents can contribute up to a staggering $140,000 into each child’s 529 plan in a single year. This is beneficial because earlier contributions have more years to grow.
South Carolina allows you to set up a 529 plan either thru a financial advisor (Indirect Plan) or directly with the state (Direct Plan). If you would like to set up a plan on your own check out https://www.futurescholar.com/enroll/
age based funds
South Carolina lets you invest into “age-based” funds. These automatically invest more aggressively for younger children and gradually become more conservative as they get closer to college age and will need to access the funds.