Just in time before taxes are due, Oregon State Treasurer Randall Edward announced a new Oregon college saving plan that will save students and parents money.
In conjunction with U.S. Bank, the state of Oregon is offering a new variation of what is currently known as the 529 Plan. The plan is designed to provide a new type of saving tool that is federal tax-free.
Since the cost of college has been on the rise since 1980, sometimes at three times the rate of inflation, the college savings plan serves as an investment advisor.
Plan holders can chose the type of portfolio that fits their needs: moderate, aggressive, balanced or conservative and start saving for future educational needs.
For example, The OCSP offers an age-based “years-to-college” investment option that will automatically become more conservative as the beneficiary nears college.
“I have three young children, and one of the first things I did as state treasurer was to open three accounts for my children. I know what the challenge is when saving for college; it’s one that we all face. As the cost of education rises, we have to try to find ways to help our citizens save for college,” Edwards said.
Oregon taxpayers pay neither state nor federal taxes on qualified withdrawals from their accounts. They can also take up to a $2,000 deduction from taxable income per tax filing, per year.
According to CEO of U.S. Bank Jerry Grundhofer, the saving plan is for everyone who wants to extend their education. “It makes higher education much easier to afford. When we say higher education, it is not only for a higher education in a four-year college; it’s for vocational schools as well. You can even use it for yourself.”
Money in the account can be used to pay for qualified higher-education expenses at any eligible private or public college, university or vocational school anywhere in the county and at some colleges outside of the USA, including graduate school. These expenses include tuition, fees, supplies, books and any other equipment that is required. It also covers room and board.
“This is a tremendous program, almost too good to be true,” Grundhofer said. “It is truly a win-win situation for everyone and it is hard to find those, but this is truly for everyone.”
The plan is designed so that anyone can open an account; there are no residency or income restrictions for the beneficiary or account holder. The account holder doesn’t need to be related to the beneficiary, and accounts can be opened for yourself.
To open an account, $250 is needed. However, the minimum is waived if you set up an automatic investment plan, which deducts $25 or more, a month, from a checking or savings account and goes directly into your saving plan.
Nancy Duran, an account holder who is currently having money withdrawn from her account on a monthly basis is pleased with the program.
“We moved over some money that was in a savings account for him (her son) that his grandmother had given him. Currently, we are putting in $50 a month, which is not much, but it mounts up. It’s totally painless, we don’t even think about it and it just grows,” Duran said.
If your parents are non-residents or if the account holder plans on moving out of Oregon, they can also set up an account, but a $30 maintenance fee will be applied and is waived after the amount of $250,000 has been reached. If the account holder moves out of state, they need to continue to pay Oregon taxes or state tax benefits will be impaired. However, federal tax benefits will stay the same.
Anyone can contribute to the account, even people unrelated to the beneficiary. Yet, only the owner has control over the account and how much money is used. And if the account beneficiary decides that he or she doesn’t want to go to school, the account can be rolled-over to another person.
For more information visit OCSP’s Web site at www.oregoncollegesavings.com or call a specialist, toll-free at 1-866-772-8486.
@sidebar:Possible tax benefits include:
* Earnings in an account will incur no federal income tax for qualified withdrawals.
* Oregon residents will incur no state income tax on qualified withdrawals.
* Contributions of up to $2,000 per tax filing, per year, are deductible from Oregon taxable income.
* Contributions up to $55,000 per person, per beneficiary, may be excluded from federal gift tax pro rata over a five-year period.
* Completed gifts are considered removed from an account owner’s estate for tax purposes. The account owner still retains control over how the assets are used.