As a trusted source, you play a critical role in guiding your clients toward sound financial decisions. With tax season around the corner, now is the time to remind them of a smart, tax-advantaged way to secure a brighter future for their loved ones: the NEST 529 Education Savings Plan.
Here are the reasons why your clients should consider contributing to their NEST 529 account before December 31, 2024:
1. Maximizing Tax Benefits
NEST 529 offers triple tax benefits that can make a big difference during tax season. Contributions are eligible for a state income tax deduction, earnings grow tax-deferred, and withdrawals for qualified education expenses are tax free.
Contributions made in 2024 by NEST 529 account owners are eligible for a Nebraska state income tax deduction up to $10,000 ($5,000 if married filing separately).1 That means they have more money to ensure that higher education remains accessible and achievable for those they care about.
NEST 529 contributions are made with after-tax dollars and any earnings grow federally tax deferred. This means clients can use any investment growth for education expenses, and they don’t have to pay federal or state income taxes on any gains/earnings while in the account.
When the time comes to use the funds for school, clients can access those carefully saved dollars tax free for qualified higher education expenses.2 Funds cover a wide range of higher education expenses including tuition, fees, room and board (if enrolled at least half time), books, supplies, equipment, a computer or printer, computer software or internet access, any special needs services for special-needs students, apprenticeship program expenses, and qualified education loan payments.
2. Gifting With Purpose
As the holidays approach, it’s a great time to talk with your clients about gifting. NEST GiftED allows family and friends to contribute to an account as a meaningful alternative to traditional holiday gifts. For a third party to qualify for the tax deduction, they would need to be an account owner.
Encourage your clients to act before yearend to ensure they reap the benefits of their NEST 529 contributions for this tax season. Not only will they enjoy tax savings, but they’ll also be helping their loved ones soar toward their career dreams.
Want to learn more? Contact us to set up a presentation for your office and find more details at NEST529.com.
An investor should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. This and other important information is contained in the fund prospectuses and the NEST Direct College Savings Plan Program Disclosure Statement (issuer’s official statement), which can be obtained at NEST529.com and should be read carefully before investing. You can lose money by investing in an Investment Option. Each of the Investment Options involves investment risks, which are described in the Program Disclosure Statement.
An investor should consider, before investing, whether the investor’s or beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s 529 plan. Investors should consult their tax advisor, attorney, and/or other advisor regarding their specific legal, investment, or tax situation.
NOT FDIC INSURED*| NO BANK GUARANTEE | MAY LOSE VALUE
(*Except the Bank Savings Underlying Investment)
1) Account owners may deduct for Nebraska income tax purposes contributions they make to their own account (and any other accounts they own in the Nebraska Educational Savings Plan Trust) up to an overall maximum of $10,000 ($5,000 if married, filing separately). Contributions in excess of $10,000 cannot be carried over to a future year. For a minor-owned or UGMA/UTMA 529 account, the minor is considered the account owner for Nebraska state income tax deduction purposes. The minor must file a Nebraska tax return for the year their contributions are made to be eligible for a tax deduction for their own contributions. In the case of a UGMA/UTMA 529 account, contributions by the parent/guardian listed as the Custodian on the UGMA/UTMA Plan account are also eligible for a Nebraska state tax deduction.
2) Withdrawals used to pay for qualified higher education expenses are free from federal and Nebraska state income tax. Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses incurred by students who are enrolled at least half time; the purchase of computer or peripheral equipment, computer software, or Internet access and related services, if used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution; certain expenses for special needs services needed by a special needs beneficiary; apprenticeship program expenses; and payment of principal or interest on any qualified education loan of the beneficiary or a sibling of the beneficiary (up to an aggregate lifetime limit of $10,000 per individual). However, earnings on all other types of withdrawals are generally subject to federal and Nebraska state income taxes, and an additional 10% federal tax.
Nebraska law does not treat the following Federal Qualified Higher Education Expenses as Nebraska Qualified Expenses: K-12 Tuition Expenses. If a withdrawal is made for such purposes, although it is a Federal Qualified Withdrawal, it will be treated as a Nebraska Non-Qualified Withdrawal and may result in the recapture of a previously claimed Nebraska state income tax deduction, and the earnings portion will be subject to Nebraska state income tax. Please consult your tax professional about your particular situation.
