The Independent
529 Plan
is the newest member of
the 529 family. It lets you pay today’s prices for future
tuition at one of the more than 270 private colleges participating
in the plan.
When
your
beneficiary
enrolls, the tuition certificates you’ve
purchased cover the same percentage of tuition they would have
covered at the time of purchase, even if the tuition has increased.
For instance, if you invest $15,000 in the plan, you’ve
prepaid a full year of tuition at a school that currently costs
$15,000 a year — no matter how much the tuition increases.
That same $15,000 would cover half a year’s tuition at a
school that currently costs $30,000.
Plus, you’ll receive a discount of at least
0.5% on current tuition rates — and many schools offer a
substantially bigger discount. That means you’d pay no more
than $14,250 for $15,000 in tuition certificates.
Tax benefits
As with other 529s, no federal income tax
is due when the credits are used. And the same federal gift tax
rules apply: You can invest up to $12,000 in 2008 ($24,000 for married couples) — an amount adjusted from time to time for inflation in increments of $1,000 — per beneficiary, provided you’ve made no
other gifts that year to the same beneficiary. Or you can invest
up to $60,000 ($120,000 for married couples) as long as you wait
five years before making another tax-free gift to the same beneficiary.
But, you must hold your tuition credits at least three years before
redeeming them.
For more information about the plan, including
a complete list of participating colleges, visit the Independent
529 Plan Web site at www.independent529plan.org.
There’s the rub
Because there’s no way of knowing at which college your beneficiary will study, you can buy up to five years’ worth of tuition at the most expensive school in the plan. But buying tuition credits doesn’t guarantee admission at a participating school, so make sure you understand the plan’s policy for refunds or rolling over to another type of account.
