South Carolina taxpayers can deduct 100% of their contributions on their state tax returns (one of only four states that offer 100% of contributions to be claimed).
There are two types of 529 plans: prepaid tuition plans and education savings plans.
Prepaid Tuition Plans allow the account holder to purchase credits for future use at current prices for the beneficiary.
- Are not guaranteed by the federal government.
- If a beneficiary does not attend a participating university, the plan may pay less than if attending a participating university.
- Usually cannot be used for room and board.
Education Savings Plans are investment accounts to save for the beneficiary’s future.
- Can be used for room and board.
- Can be used at most universities.
- Can also be used to pay for private, public, or religious elementary or secondary school.
- Earnings are not subject to federal income tax, and many cases, state income tax.
What if my child does not go to college?
- You can still use the funds to pay off your student loan debts.
- Transfer to another beneficiary like another child, or grandchild (you can even transfer to yourself).
- If there is no one to transfer the funds to you can withdraw the funds and pay a 10% fee as well as applicable state and federal taxes.
What if my child gets scholarships to pay for tuition?
You can withdraw the 529 funds and the penalty for taking the cash is waived.
Do you have other questions regarding 529 plans? Reach out and ask one of our team members at Masters Financial Group.
An Introduction to 529 Plans. (2018, May 29). https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html#:~:text=529%20plans%2C%20legally%20known%20as,plans%20and%20education%20savings%20plans.
Kerr, E. (2020, March 11). Avoid 529 plan withdrawal penalty if your child skips college. https://www.usnews.com/education/best-colleges/paying-for-college/articles/avoid-529-plan-withdrawal-penalty-if-your-child-skips-college
Simon, J. (2021, September 7). South Carolina (SC) 529 plans: Fees, investment options, features. SmartAsset. https://smartasset.com/college-savings-plans/south-carolina-529-plans#:~:text=South%20Carolina%20sponsors%20two%20529,most%20generous%20in%20the%20country.