Future Scholar Blog

December 1, 2023

Lower Your Taxes with a Year-End Contribution

There’s no escaping the hustle and bustle of December. Even if you love gift shopping, Christmas music, and holiday parties, the end of the year is often nothing short of exhausting.

After you’ve unwrapped the packages and carved up the turkey, get ready to carve out a little time for a quick move that can boost your college savings and lower your taxes.

Review your 529 savings.

Start by reviewing the amount of savings in your Future Scholar account. Are you on target to meet your savings goals? Next, review the contributions you’ve made to your 529 account in 2023. Have you contributed all that your budget allows?

By contributing as much as possible as early as possible, your college savings have the chance to grow over time, and your earnings will have the ability to be compounded for as long as possible.

Time to consider an additional contribution that could not only boost your college savings but also help you reap the benefits of South Carolina state tax incentives.

Keep the following in mind when considering an end-of-the-year (or anytime) contribution:

1. You can save on your state income taxes.

South Carolina allows residents to deduct 100% of their 529 contributions to a Future Scholar account. That very generous tax benefit is one of the best in the nation. Use it to your advantage by making an extra contribution to your Future Scholar account in 2023.

2. There’s no December deadline for tax savings.

You can contribute to your 529 account at any time. However, each state sets a deadline for contributions that qualify for tax savings for the current year. South Carolina’s Future Scholar deadline extends all the way up to Tax Day - April 15, 2024 – allowing you to claim those contributions on your 2023 tax returns.

3. Consider front-loading your account.

If you are financially able, you may want to consider frontloading your Future Scholar plan. Front-loading allows a larger amount of money to be given at one time so the funds have the ability to compound for longer than they would if making regular annual contributions.

The IRS has a special gifting provision for front-loading 529 accounts that allows you to exceed the $17,000 annual gift tax limit for an individual (or $34,000 for spouses). When you front-load, you contribute a one-time gift of the amount usually allowed over five years - without the gift tax consequences. That’s five years-worth of maximum contributions at one time ($17,000 x 5 = $85,000).

By front-loading, you can contribute $85,000 per child in year one, sit back, and enjoy the benefits of compounding interest on the larger amount. The contribution will be removed from your taxable estate and be treated as if you gave $17,000 per year for five years by the IRS. If you file jointly, you and your spouse are allowed to front-load up to $170,000. It’s important to remember that any gifts you make to the Future Scholar account beyond these amounts over the five years could be subject to federal taxes. A tax professional can help you decide if front-loading is good for your family.

4. Decide now to make your tax refund matter.

Are you expecting a tax refund check in 2024? Consider using it to invest in your child’s future education. Earmark it now for a lump sum contribution to boost the college savings in your 529 account. That way you won’t be tempted to spend it on something less meaningful.

5. Appreciate the benefits of saving with Future Scholar.

Enjoy these last days of 2023 and the wonderful benefits of watching your Future Scholar savings grow tax-free. Before long, the time will come when you’ll be using those funds to pay for qualified education expenses, and when you do, you’ll be thrilled to withdraw those funds tax-free, too.

Ready to
get started?

Once you’ve enrolled in Future Scholar, it’s easy to make a contribution. Anyone, including parents, grandparents, or other family and friends, can contribute.

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Future Scholar 529 Plan
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Click to expand full legal disclosure

Investing involves risk including the risk of loss of principal. Please consider the investment objectives, risks, charges and expenses carefully before investing. Contact your financial advisor or visit futurescholar.com for a Direct Plan Program Description, which contains this and other important information about the Future Scholar 529 College Savings Plan. Read it carefully before investing. You should also consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds and protection from creditors that are only available for investments in such state's qualified tuition program.

Tax treatment varies by state. The tax information set forth on this website is general in nature and does not constitute tax advice on the part of Columbia Management Investment Distributors, Inc., its affiliates or the South Carolina Office of State Treasurer. Please contact your tax advisor before making any tax related decisions.

The Direct Plan is sold directly by the Program and is limited to a specific group of investors, as described in the Program Description . You may also participate in the Advisor Plan, which is sold exclusively through financial advisors. The Advisor Plan offers additional investment choices, but the fees and expenses are higher. Please contact your financial advisor for additional information on the Advisor Plan.

The Office of State Treasurer of South Carolina (the State Treasurer) administers the Program and has selected Columbia Management Investment Advisers, LLC and Columbia Management Investment Distributors, Inc. (Columbia Management) as Program Manager. Columbia Management and its affiliates are responsible for providing certain administrative, recordkeeping and investment services, and for the marketing of the Program. Columbia Management is not affiliated with the State Treasurer.