Tax Benefits

What are the tax advantages of contributing to a grandchild’s existing savings account?

Anyone can make a contribution to a 529 account . You don’t necessarily have to be the account owner.
If you are a Colorado resident, contributions made directly to a CollegeInvest savings account are deductible from your Colorado state income tax.¹

For grandparents who are not the account owner, it is suggested you make a contribution directly to the specific college savings account if you want to claim this deduction.

CollegeInvest has the ONLY 529 plan in Colorado that provides FDIC insurance protection AND the state tax deduction for Colorado residents.

These tax advantages apply regardless of where the student (beneficiary) attends school, whether it’s located in Colorado or any other state in the country.

What are the tax benefits if YOU open an account for your grandchild?

First, the earnings on your savings investment grow federal and state income tax deferred , and qualified withdrawals are tax free.² Qualified withdrawals include paying for tuition and required fees, certain room and board expenses, and/or the costs of required supplies.

But note, withdrawals from a 529 account that are not used to pay a beneficiary’s qualified education expenses , called non-qualified withdrawals , will be subject to federal and state income tax and a 10 percent federal tax penalty on earnings.

Second, there are no age or income limits in contributing or owning a 529 account. This means that anyone qualifies and can receive these benefits. Not all college savings options allow this flexibility.

A word of caution

Estate , gift, and generation-skipping tax issues arising in connection with 529 Plans can be quite complicated. You and the Beneficiary should consult with a qualified tax advisor or specialist regarding these issues and the specific application of these rules to their particular circumstances.

 ¹ Contributions to the Plan(s) are deductible from Colorado State income tax in the tax year of the contribution, up to your Colorado taxable income for that year.  Such deductions are subject to recapture in subsequent years in which non-qualified withdrawals are made.

 ² The earnings portion of a non-qualified withdrawal is subject to federal income taxes and any applicable state income tax, as well as an additional 10% federal penalty tax.

Important Considerations

To learn about CollegeInvest’s 529 program, its objectives, risks, charges, expenses, limitations, restrictions and qualifications regarding the Plans’ benefits and potential tax advantages, please read and consider carefully the Program Disclosure Statements (PDS) available at www.collegeinvest.org before investing. Also, check with your or your beneficiary’s home state to learn if it offers tax or other benefits for investing in its own plan. Administered and issued by CollegeInvest.

CollegeInvest and the CollegeInvest logo are registered trademarks of CollegeInvest.