From my understanding, the main benefit of 529 plans is that you don't have to pay capital-gains taxes. The contributions themselves aren't tax deductible, and our household income is too high to benefit from any state-tax benefits.
Here's the alternative our family is considering:
- Take the money we would have put into 529, and invest them in our existing brokerage account instead
- When our child attends college, gift some appreciated stock to our child each year
- Our child can sell the appreciated stock and use it to pay for tuition and other expenses. Because they have no other income, their capital-gains tax rate will be effectively 0%
The benefits of the above, compared to 529:
- Don't have to pay capital-gains taxes either way
- Equal impact on FAFSA for both
- If for some reason our child doesn't need the money for college expenses, we can still easily use it for other purposes
- 529 can only be funded via cash. Whereas I can gift stock that has already appreciated significantly today. Lowering my tax burden even further
Related link: https://www.nerdwallet.com/article/investing/gifting-stocks
Am I missing anything?
Submitted June 17, 2024 at 05:16PM by anon19895 https://ift.tt/XNPCq2I
