VSAC encourages families to look ahead as they plan for their kids’ (or grandkids’) future possibilities. Give the gift of education savings with VT529 … and receive a Vermont income tax credit for 2023.
If you still need to buy holiday gifts for children (and any students) in your life, you may be asking yourself, “What can I give that will be lasting and meaningful, long after the gift wrap is discarded?”
And if you’re a parent or guardian looking to balance your books after finishing your holiday shopping, you may be asking yourself, “Are there more tax credits to take advantage of before the end of the year?”
VSAC has a great answer to both questions, and just in time: a VT529 education savings account. And we’re not alone: A recent College Savings Foundation survey found that 45% of parents would ask for gifts to their children’s 529 account to celebrate the holidays. By opening, or contributing to, a VT529 account, you can help fund education opportunities for anyone on your gift list AND get a credit on your Vermont tax return for deposits made by December 31.
Here’s how it works.
First – What is a “529”?
A 529 plan is an education savings plan designed to help families save for higher education costs. The plans are called “529s” because they’re named after Section 529 of the Internal Revenue Code, the part of the tax law that established these funds in 1996. While there are many 529 options out there, only the VT529 plan, administered by VSAC for the State of Vermont, offers an income tax credit to Vermont taxpayers.
Education savings: The gift that keeps growing and giving
529 accounts, like other investments, take advantage of the concept of compound interest, which allows an initial investment to grow over time, particularly when you have many years before you’ll need to make a withdrawal. (That’s one of many reasons why a 529 account makes a great baby gift!)
However, a 529 plan makes sense for students of any age—from teens to high school students to adults seeking training—there’s no age limit! All earnings in a 529 account grow free of state and federal taxes, so when you take money out to cover qualified educational expenses, you don’t pay any taxes on your interest and gains. Plus, as you save, you can take a 10% Vermont income tax credit each year on funds that you deposit in a VT529 account.
“College savings accounts are a powerful tool,” said Scott Giles, president and CEO of the Vermont Student Assistance Corp., the state-appointed administrator of the VT529 plan. “Education is one of the most important investments a student can make. That’s why we want to encourage families to save for college and other career training. Vermont’s 529 savings plan is a great place to start.”
Even small amounts of savings can help your kids (and grandkids) get ready for tomorrow’s opportunities, no matter what path they want to explore. Studies show that students with education savings are three times more likely to pursue education after high school and four times more likely to complete that training. Which means they’ll be more prepared with the degree or credentials they need for the jobs of the future.
VT529: Easy to start, flexible to use
Because 529 plans can be opened with just $25 (or less with payroll deductions), they’re accessible for families at most income levels. A 529 account is flexible, too: When you fund a VT529 account, you can choose, and change, your investment strategy. VT529 offers six investment portfolios to choose from (most families select the age-based plan, to match their children’s needs as they grow). Whichever option you initially choose, you can always change your allocations as your goals evolve.
When it’s time to use your VT529 funds, the list of qualified education-related includes a lot more than just four-year college tuition. VT529 funds can be used for apprenticeships, certifications, trade & vocational programs, college and grad school … and more. Many people don’t realize that 529 accounts can be used to pay for student food and housing costs—either on- or off-campus—computers, books and other educational equipment, and even to make student loan payments. Families who send their kids to private K-12 schools can also use 529 funds for that purpose.
If your intended beneficiary decides not to use the savings, you can transfer the funds to a different beneficiary. Learn more about all the flexible features of 529s.
With VT529, you can give the gift of education savings …
VSAC’s Gift of College gift card is one easy way to give (or ask for) the gift of education opportunity. You can find VSAC’s Gift of College gift cards at Vermont locations of Cumberland Farms and Kinney Drugs stores, making it convenient to pick up a local card for the loved ones on your holiday lists. Learn more about purchasing or redeeming a VSAC Gift of College card.
Already have a VT529 account? Invite parents, grandparents, family members, and friends to contribute to an existing VT529 account with a gift of any amount using the VT529 secure e-gifting option.
… and get a Vermont tax credit for 2023
As Vermont’s official 529 savings program, VT529 is the only educational savings program that offers a Vermont state income tax credit. Deposits made into a VT529 account by December 31 qualify for a 10% tax credit, for contributions up to $2,500 per beneficiary per year (or up to $5,000 per beneficiary if filing jointly).
So a single tax filer funding a 529 account for one child could claim a state tax credit up to $250, and a couple could claim up to $500. For a family with two children, the single filer could claim up to $500, and the couple, $1,000 – and so on.
Rollovers from another state’s 529 plan into VT529 are also eligible for the tax credit on the contributions portion of the rollover. The funds must remain in the VT529 plan for the remainder of the tax year to claim the tax credit.
For details and examples of the Vermont tax credit guidelines, see the Vermont Department of Taxes Technical Bulletin (TB-66). If you have specific questions about how the income tax advantages apply to your household, you may also want to chat with your tax preparer.
For more on saving for (and gifting) education opportunities with VT529, plus details on the many benefits of the VT529 plan, visitvsac.org/save.
Happy Holidays!
This story is produced by Vermont Student Assistance Corp., created by the Vermont Legislature in 1965 as a public nonprofit agency, to advocate for Vermont students and their families to ensure that they achieve their education goals. Our vision is to create opportunities for all Vermont students, but particularly for those—of any age—who believe that the doors to higher education are closed to them. We begin by helping families save for education with Vermont’s state-sponsored 529 savings program. To help Vermonters plan and pay for college or career training, our counselors work with students in nearly every Vermont middle school and high school, and again as adults. Our grant and scholarship programs attract national recognition, and our loan programs and loan forgiveness programs are saving Vermont families thousands of dollars in interest. Visit vsac.org to learn more.
