Pub. 1 2019 Issue 5

S E P T E M B E R / O C T O B E R 2 0 1 9 24 nebraska cpas What Options Are Available to Save for College? There are several routes available for college savers, some more tax friendly than others. Families can save with a standard sav- ings account, though low interest rates often make it inefficient to save over time. Another option to achieve more growth is to invest in a brokerage account or mutual fund, though this extra growth will be somewhat offset by tax requirements such as capital gains tax. A third option is to save with a Roth IRA, which will help grow savings quicker than a standard savings account and avoid many of the tax obligations of a brokerage account. However, Roth IRA accounts are subject to income limits, and their services and reg- ulations are optimized for retirement saving, not college saving. One of the most useful tools available is a 529 college savings plan. A 529 plan is specifically designed to help Americans save for college, with tailored federal and state tax benefits on savings and withdrawals and significant state deductions, as well as investment options optimized for the college savings journey. 529 plans are highly recommended by financial experts and are widely considered the most effective way to save for college. However, in its 2019 College Savings Survey, Nebraska’s NEST 529 College Savings Plan found that 57 percent of Americans are unfamiliar with 529 plans and the benefits they provide. 2 To help clients make a smart choice for their college savings, make sure they don’t fall into that 57 percent category. What Are the Tax Advantages of a 529 Plan for Nebraskans? There are numerous tax advantages available to Nebraskans who save for college with a 529 plan. First, contributions grow federally and state tax-deferred in a 529 plan account, meaning that the CONTINUED FROM PAGE 23 Families should keep in mind that the tax benefits listed so far are specifically designed to help magnify their college savings.