The holiday season is upon us, and many are searching for those perfect gifts for our loved ones, especially the children in our lives. While toys and electronics are popular choices, one gift that will benefit them for a lifetime is a college savings plan.
On Jan. 1, 2007, a new college savings plan took effect in Indiana; the CollegeChoice 529 Investment Plan. The plan allows parents, grandparents, aunts and uncles to contribute to college funds and receive a 20-percent tax credit. Anyone over the age of 18 can open a CollegeChoice account for any beneficiary. You can establish an account with just $50 and gradually build it with monthly investments of $25 or more.
There is no limit to the annual amount you contribute to a CollegeChoice account, but the 20-percent tax credit only applies to the first $5,000 you contribute. This is a dollar-for-dollar reduction in the income tax you owe. Therefore, if you are an Indiana taxpayer and you make an annual contribution of up to $5,000 to your CollegeChoice account, you will receive the maximum annual tax credit of $1,000. More than one person can contribute to the account and receive the tax credit until total contributions reach $298,770. After that, the account may continue to grow higher through investment earnings only.
To redeem your 20-percent tax credit on CollegeChoice contributions, you must claim the credit on your annual Indiana state tax return. These contributions must be received before Dec. 31 in order to claim the tax credit. A contribution is effective when received, not when it is postmarked.
Helping the children in your life achieve their educational goals can provide them with a world of opportunity. College tuition is already high, and with the cost continuing to skyrocket, it may seem out of reach. However, the rewards are even higher. According to the 2005 U.S. Census Bureau data, the average household of a bachelor's degree holder earned roughly 86 percent more than the average household of a high school graduate. College may be a large expense but by saving now, you can give the gift of an education that will provide a loved one with endless rewards.
If you have any questions or would like to open an account, you can call participant services at 1-866-400-PLAN (7526), e-mail them at email@example.com or speak with your financial advisor. As always, if you have any question you may always call my office at 1-800-382-9841, e-mail me at firstname.lastname@example.org or write me at 200 W. Washington St., Indianapolis, IN 46204.