529 Q

[glitzy07]

In an effort to start knocking out some financial goals, I finally opened 529 accounts for my younger children today and set up small recurring monthly deposits. It's not much, but it's something until we reduce daycare expenses in September!

My question is if it's even worth opening an account for our oldest (my stepson), who is currently a freshman in high school. We've never been in a financial position to be saving much for him because of the amount of child support H pays for him. His mom says that she's putting some of it aside for him in an account for school, but we have no way of knowing that. Either way, he's only 3 years away from graduating and doesn't have time for a lot of compound interest earning. Also, he 100% intends to go to trade school (he wants to be a pipe fitter like his stepdad) vs a 4 year school. So I'm thinking we're better off just saving money in a traditional savings account for him now instead of 529...right?

TIA!

[flygirl]

I still might because if it’s used for school, then the earnings are tax free. Also you might get a better return in a 529 than a traditional savings account.

[simpsongal]

Is there a tax benefit for 529 in your state? I’d check if you could use it for trade school too.

My dad was a union pipe fitter - good pay, very tough job.

[purplepenguin7]

If you have the means to save for your eldest child as well, I would still open a 529 now. The funds can definitely be used to pay for trade school, and additionally, any unused money can be allocated to your younger children.

[glitzy07]

Jan 18, 2021 13:54:57 GMT -5 simpsongal said:

Is there a tax benefit for 529 in your state? I’d check if you could use it for trade school too.

My dad was a union pipe fitter - good pay, very tough job.

I believe MN just recently changed this. Here's what I'm seeing when I google. Additionally if it matters, we've taken the standard deduction for the past two years because it was better for us tax-wise. Usually our tax professional runs it both ways and chooses the best outcome.

• Deduct up to $3,000 for a married couple filing jointly or $1,500 for all other filers for contributions made to a qualified 529 account.

• Instead, may opt for a non-refundable tax credit of half contributions up to $500, subject to phase-out starting at a federal adjusted gross income of $75,000 (single filer). The credit is reduced by any withdrawals made by that taxpayer during the taxable year.

[glitzy07]

Jan 18, 2021 14:03:11 GMT -5 purplepenguin7 said:

If you have the means to save for your eldest child as well, I would still open a 529 now. The funds can definitely be used to pay for trade school, and additionally, any unused money can be allocated to your younger children.

I hadn't thought of this part!

We'd plan to save the same monthly amount for him as the other two kids, but I was just trying to determine the best place (529, savings account, etc). Seems like 529 still may be a good option based on the above?

[dontlook]

We live in MN and do enough to get the tax deduction. We save more money in other vehicles but prioritize hitting the 3k each year. I don’t think it would hurt to put it in a 529 especially because you can pass it on to other kids if he doesn’t need it/use it.