Tax Services • Published 6/06/2019 START Saving for Your Child's Education: 529 Plans

The end of the school year brings with it a chance to look toward the future and opportunities that lie ahead for the next generation. However, if considering that future gives you some anxiety about your child or grandchild’s looming education costs, you’re not alone. With more students attending private schools for their K-12 education and college tuition costs on the rise, it’s important to plan ahead to ensure that all their needs are covered when that day comes.

One option to consider is a Louisiana 529 plan called the Student Tuition Assistance & Revenue Trust (START) program. Saving funds for education through this program can help address the cost of educating children, and the funds are tax-free for the beneficiary if used for qualified education expenses. There are two types of accounts available: START Saving is for college and START K12 is for kindergarten through 12^th grade. 

START K12 is a new program which allows you to help save for school tuition kindergarten through 12^th grade. Any funds not used for kindergarten through 12^th grade can be rolled over to a START Saving Program account which can be used for college expenses.

Key considerations for the START K12 account:

1. Must be used for kindergarten through 12^th grade tuition only.
2. Withdrawals are limited to a maximum of $10,000 per year.
3. Deposits are limited to a lifetime maximum of $180,000.
4. All earnings in the account are tax-free if funds are used for qualified education expenses.
5. The account owner must be 18 years or older.
6. Either the account owners or beneficiary needs to be a Louisiana Resident.
7. There is no tax deduction for contributions to a START K12 account.
8. All contributions are considered gifts to the beneficiary. The annual gift limit for 2019 is $15,000 per person, although the IRS allows an exception to pre-fund 5 years at one time.
9. You can transfer the account to another beneficiary.
10. Funds can be rolled over to a START Saving account.
11. If the funds are not used, you can withdraw the funds but will pay taxes on the earnings if not used for kindergarten through 12^th grade tuition.

Key considerations for the START Saving account:

1. Withdrawals are used for qualified higher education expenses which include tuition, fees, books, supplies, equipment and room & board.
2. Deposits are limited to a lifetime maximum of $500,000.
3. All earnings in the account are tax-free if funds are used for qualified education expenses.
4. The account owner must be 18 years or older.
5. Either the account owners or beneficiary must be a Louisiana Resident.
6. Contributions allow for a Louisiana deduction when the contribution is made, up to $2,400 per year per beneficiary (up to $144 in tax savings per beneficiary), or $4,800 for married filing jointly.
7. All contributions are considered gifts to the beneficiary. The annual gift limit for 2019 is $15,000 for per person, although the IRS allows an exception to pre-fund 5 years at one time.
8. You can transfer the account to another beneficiary.
9. Funds cannot be rolled over to START K12 account.
10. If funds are not used, you can withdraw the funds but will pay taxes on the earnings if not used for qualified higher education expenses.

While these 529 plans are specifically for Louisiana residents, several other states offer their own college savings plans. While there is no federal tax deduction for these plans, the state tax savings make 529 accounts a good place to start when weighing your college savings options. Many financial institutions offer general 529 accounts as well.

For additional information, please visit www.startsaving.la.gov or contact us for a more personalized review of your options.