Save Money for College and Cut Your Tax Bill

You can save for your child’s college education while you save money off of your 2012 Pennsylvania earned income tax if you open or add to your PA 529 College Saving Program by Dec. 31.

To encourage more families to save for college in a tax-advantaged way, the PA 529 College Savings Program is offering free enrollment - a $50 savings - for all new PA 529 Guaranteed Savings Plan (GSP) accounts opened by Dec. 31 at www.PA529.com. Use code TAXSMART when prompted.

The PA 529 GSP is designed to help savings grow to meet the future cost of education. When used for qualified higher education expenses, PA 529 GSP contributions grow at the rate of tuition inflation (subject to fees and premiums).

For example, if you save enough for a semester at one of the State System of Higher Education universities today, you will have enough for a semester there in the future - no matter when or how much tuition has gone up in the meantime.

Earnings in a 529 plan are not subject to yearly taxes as they grow, and when used for qualified higher education expenses, earnings are tax-exempt when withdrawn.

Under the program, taxpayers can deduct up to $13,000 per beneficiary in PA 529 contributions from Pennsylvania taxable income on their state tax returns for 2012. Married couples filing jointly can deduct up to $26,000 per beneficiary if each spouse has taxable income of at least the amount deducted.

In addition, family and friends can contribute up to $65,000 in a single year ($130,000 for a married couple filing jointly) for each beneficiary without incurring federal gift tax consequences (assumes no other gifts in the next four years).

Families can visit www.PA529.com to learn more. The staff of state Sen. Lisa Boscola are also ready to help families obtain more information and apply to enter the program.