Please help me with 529 plan

[Anonymous]

Ok, I'm finally getting around to starting a 529 for my kid. I had thought you funded the 529 directly from your paycheck, before the money was taxed, like a 401k. But it looks like it is funded with post-taxed money? Is that right? So you don't pay taxes when you withdraw the funds, but you use money from your net income to fund it.

I thought it was like a 401k, but can someone just confirm that I am wrong. It won't really matter if I fund it directly out of our checking account or if I do it directly from my paycheck?

[Anonymous]

Confirming that you're wrong. Maybe you're thinking about the dependent care account that you can use for daycare.

[Anonymous]

PP again - there's no option to fund it directly from your paycheck pre-tax or post-tax.

[Anonymous]

Thanks. I never looked into 529 plans except knowing that in theory, I should do one for the kid. Appreciate the quick response!

[Anonymous]

Post tax money. Depending on the state, you might get a deduction for your state income taxes if you use that state's plan.

[Anonymous]

We are in DC. We have a DC 529 plan for each kid. The money is post-tax but we do get a deduction at tax time.

[Anonymous]

You put it in post tax, and note that your deduction is only for state income taxes. So for every dollar you put in there, you'll get an 8.5% deduction on your state taxes come next April. Better than nothing.

[Anonymous]

One other tip worth noting in DC - if your'e going to put in more than $4k, establish a separate account for each spouse to put in. $4k is the max deductible per spouse ($8K per couple if filing jointly, and each has an account).If you're over the 4k, you can carry forward.

[Anonymous]

Anonymous wrote:PP again - there's no option to fund it directly from your paycheck pre-tax or post-tax.

The Utah plan has the option of payroll deduction. I doubt they're the only one.

[Anonymous]

Anonymous wrote:One other tip worth noting in DC - if your'e going to put in more than $4k, establish a separate account for each spouse to put in. $4k is the max deductible per spouse ($8K per couple if filing jointly, and each has an account).If you're over the 4k, you can carry forward.

In MD you can play this game several ways. You can create an account with yourself as the beneficiary, another with the kid, and another with the spouse. The max deduction is per account "pair" (owner/beneficiary).

[Anonymous]

The Saving for College website has lots of good information.