Is the money you put into a Florida prepaid college savings plan tax deductible?
A prepaid college savings plan is an education savings plan that allows you to save for your child’s college education costs. It’s a type of 529 plan, the name of which comes from section 529 of the Federal Tax Code; 529 savings plans allow an account holder to buy college credits from qualifying public universities in their state.
No matter how much the costs of tuition in your state go up, the number of course credits and fees that you have paid for will remain the same. This protects your investment from inflating higher education costs. This is what makes prepaid college savings plans unique.
What’s more, there are multiple tax benefits to investing in a prepaid college savings plan.
What are the tax benefits of a prepaid college savings plan?
- Earnings are not subject to federal tax — When earnings from a prepaid college savings plan are used on higher education expenses, such as tuition, fees, books, and room and board, they are not subject to any federal tax.
- Contributions are tax deductible in some states — Depending on what state you live in and where your child chooses to go to college, your contributions to a prepaid college savings plan may earn you deductions on your state income tax. However, in states like Florida where there is no state income tax, such deductions are not applicable. Residents of Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana and Pennsylvania offer tax deductions for contributions to a prepaid college savings plan.
- Contributions are not subject to federal gift tax — If you contribute $14,000 or less per year to your child’s prepaid college savings plan, those contributions will not be subject to the federal gift tax.
Should I open a Florida prepaid savings plan for my child’s education?
While Florida prepaid savings plans are not tax deductible, they are still a great way to ensure that your child’s financial needs will be met, regardless of the rising costs of higher education.
Talk to a ProVise CFP® professional about your child’s higher education costs and whether a prepaid savings plan is right for you
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about your child’s future? Contact ProVise today to schedule a complimentary consultation.