By Tyler Lodahl and Echo Huang, CPA, CFP and CFA
As the former President of South Africa and Nobel Peace Prize recipient, Nelson Mandela, once said: "Education is the most powerful weapon which you can use to change the world." And even while obtaining an education is integral to our world, planning for a child’s education can be an exciting, yet daunting task. Thankfully there are some tax-advantaged strategies you can consider:
1. Qualified Tuition Programs/529 plans
2. Coverdell ESA (Education Savings Account)
3. Roth IRA
4. American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit
What is a 529 plan and what are the benefits of utilizing one?
A 529 plan is a tax-advantaged savings plan designed to encourage savings for future college or other post-secondary education expenses. 529 plans, legally known as “qualified tuition plans”, are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. A major benefit of 529 plans is that anyone is able to make contributions regardless of their annual earnings.