It's That Time Of Year Again

Contribute to a 529 plan before New Year's and save money on your Pennsylvania income taxes

Meeting deadlines and fulfilling last minute responsibilities are not foreign to many individuals during this time of year. This is the time of year people rush to make year end contributions to 529 college savings plans. Pennsylvania residents have until December 31, 2010 to make contributions that can possibly count towards the 2010 tax year. Contributions can be made online or by mail. In order to receive credit for the current tax year, your deposit must be received online or postmarked in the current year.

The state tax benefit for Pennsylvania tax payers includes a $13,000 tax deduction per beneficiary (future student) for contributions made to any 529 account. If you are married, you can deduct up to $26,000 per beneficiary each tax year provided you and your spouse have taxable income of at least $13,000 each.
There are two programs within the state of Pennsylvania which include the Guaranteed Savings Plan and the Pa Investment Plan. The difference between both plans is with the Guaranteed Savings plan you are purchasing a tuition level where the plan guarantees your savings will keep pace with rising tuition costs. The Investment Plan allows you to invest in the stock market through a variety of low cost investments offered by Vanguard.
You can make deposits by sending a check, money order, or contribute online through electronic bank transfers. The fees to participate in both plans are reasonably under 1 percent and account maintenance fees may also apply.
There are some rewards and scholarship programs associated with the plans. Upromise Rewards is a rewards service that allows you to receive a percentage of your total amount spent at various companies in a rewards account; then contribute the funds accumulated to your 529 plan. Of course you will need to participate in a plan affiliated with Upromise. The SAGE scholars program enables you to earn tuition discounts at more than 200 participating private institutions. The future student needs to be under the age of 16 and the account owner has to be a Pennsylvania resident at the time of the 529 is opened.