January 1, 2022

5 Tax-Friendly Reasons to Contribute to a Future Scholar Plan

When the calendar flips to a new year, it’s time to think about smart ways to prepare your finances for tax season. Contributing to your child’s 529 college savings plan allows you to save for your child’s future and save on your taxes at the same time. 

Take advantage of these tax-related benefits when you open and invest in a Future Scholar plan:

#1. Money in your account grows tax-free, so you enjoy all the benefits of compound interest. Unlike a traditional savings account, you do not pay taxes on any earnings in your account.

#2. When used for approved expenses, money in your account is withdrawn tax-free. Whether it’s books, a new laptop for school, or even student housing, money can be withdrawn for qualified expenses with no tax ramifications.

#3. South Carolinians can deduct contributions to Future Scholar on their SC state income tax return. Future Scholar is the only 529 plan that allows South Carolina residents to take a deduction on their state income taxes. An out-of-state plan will not permit you to deduct your contributions from your state income taxes.

#4. If you have a large sum of money you want to contribute to a 529 plan, you can “frontload” your plan. Frontloading a plan allows you to contribute a maximum of $80,000 (or $160,000 for joint filers) without incurring a gift tax.

#5. If your beneficiary doesn’t need the money, or decides not to go to college, you have options. You can transfer funds from one beneficiary to a sibling or other close relative, or you can hang on to them to use for a graduate degree. Need the money for something other than a qualified expense? It’s your money to withdraw at your discretion. You can expect to pay taxes on your earnings and, in some cases, a 10% penalty. However, it’s nice to know you can access your funds when needed.

Give Your Child the Hope of Education

By investing in a Future Scholar 529 college savings plan you can help save for your child’s education and simultaneously reduce your taxes.

“With the rising costs of attending college, saving for a child’s future education is more important than ever,” said Treasurer Curtis Loftis. “The ability to deduct Future Scholar account contributions on S.C. taxes is just one reason why Future Scholar is the smart, easy way to save.”

For more information on how you can open a Future Scholar 529 College Savings Plan for a child, grandchild, or loved one, please head over to our enrollment page. There is no minimum amount required, and there are three easy ways to open a new account. Learn more by clicking here.

For answers to any questions, feel free to contact us!