Refresher on Tax-Smart College Savings Strategies for Parents

But only when you start writing checks to cover your youngster’s college bills, do you really start feeling the terrible pain.

How much pain?

Well, the average cost of college tuition, fees, and room and board was recently running at $32,500.
If your son or daughter is heading to a private, non-profit four-year college, you’ll need to cough up $50,000!

What can you do to help you cover college costs?

You can take advantage of two provisions of the tax law that can save you a whole lot of money.

What are they and how can you use them to lighten your financial burden?

You’ll get all the details when you…

Contribute to a Cloverdale Education Savings account (CESA).
- You can use a CESA to pay qualified education expenses for the account beneficiary (your college-bound child)
- You can contribute up to $2,000 per year to the child’s CESA. If you have several children you can set up a CESA for each of them
- Contributions are non-deductible, but earnings are allowed to accumulate free of any federal income tax
- You can take tax-free withdrawals to pay for the account beneficiary’s college tuition, fees, books, supplies, and room and board

Contribute to a Section 529 college savings plan.
- Section 529 college savings plans are state-sponsored arrangements that authorize extremely favorable treatment under the federal income and gift tax rules
- As the parent of a college-bound child you begin by making contributions into an account designated for the beneficiary who you specify (your child)
- When your child reaches college age, you can take federal income-tax-free withdrawals to pay eligible college expenses

We’ll cover a number of other important topics as well.
- Income tax advantages the 529 college savings plan provides
- Estate tax-planning advantages
- The two flavors of 529 plans and help deciding which one is right for you
- And much more