Save with great tax benefits
When you invest with the CollegeCounts 529 Fund, you benefit from multiple tax advantages that could help you accumulate more dollars for college.
Alabama state income tax deduction ($5,000 / $10,000) for contributions to the Plan. The State of Alabama allows a deduction, not to exceed $5,000 per taxpayer, as an adjustment to income on the Alabama income tax return for contributors to the CollegeCounts 529 Fund or the PACT Program. The Deduction may equal an amount up to $10,000 for married taxpayers filing a joint return where both taxpayers are making such contributions into the CollegeCounts 529 Fund or the PACT Program (closed to new investors).
Tax-deferred growth of earnings. Contributions and any earnings grow in the plan with no federal or state income taxes deducted each year providing the potential for additional growth. Over the course of 18 years, your tax-deferred investment could earn more than $20,000 in additional college savings.
Tax-free withdrawals for qualified college expenses. When funds are withdrawn for qualified college expenses they come out federal and Alabama state income tax-free. Qualified college expenses include tuition, fees, books, supplies and equipment required for enrollment at a qualified institution of higher education. Room and board is considered a qualified education-related expense if the student is enrolled on at least a half-time basis. Computers, computer equipment, and Internet access and related services that the beneficiary or the beneficiary’s family uses during the time the beneficiary is enrolled are also considered qualified higher education expenses if paid or incurred in 2009 or 2010. Withdrawals for nonqualified expenses may be subject to state and federal taxes as well as a 10 percent early withdrawal penalty.
Gift and Estate Tax Treatment. Contributions to an account are considered a gift from the contributor to the designated beneficiary and are generally excludible from the account owners taxable estate. Amounts in an account at the death of the beneficiary are includible in the designated beneficiary’s estate.
An account owner’s contributions to an account are eligible for the annual gift tax exclusion, which is currently $13,000 per donee. 529 college savings plans also allow for a special gift tax exclusion election. In general, this rule allows you to contribute up to $65,000 for each beneficiary in a single year without federal gift tax consequences, provided that you make no other gifts to the beneficiary in the same year or in any of the succeeding four calendar years. This election needs to be made on a federal gift tax return. Under this rule your contributions are subject to add back into your taxable estate in the event of your death within the five year period. You should consult your tax advisor regarding your situation.1This hypothetical example illustrates a $250 monthly investment earning 7% annually, compounded monthly for 18 years, with a 33% tax rate applied versus the same investment tax-free. Dollar cost averaging does not ensure a profit and does not protect against loss in declining markets. This example is based on projections and does not reflect your actual investment in the CollegeCounts 529 Fund. If fees were included, the returns would be lower. Your actual results may be more or less.
The CollegeCounts 529 Fund is a qualified tuition program under Section 529 of the Internal Revenue Code that is sponsored by the State of Alabama and administered by the Board of Trustees of the ACES Trust Fund (the “Trust” and plan issuer). Union Bank & Trust Company serves as Program Manager. Accounts and investments under the CollegeCounts 529 Fund are not insured or guaranteed by the FDIC, the State of Alabama, the State Treasurer of Alabama, the Board, the Trust, the Program, Union Bank & Trust Company, or any other entity.
Before investing, you should consider the investment objectives, risks, fees, expenses, and tax consequences associated with the Program. All of this information is contained in the Program Disclosure Statement. Please read it carefully before investing.
If you or your beneficiary is not an Alabama resident, consider whether your home state or the home state of your designated beneficiary offers a qualified tuition program that provides a state tax deduction or other benefits to residents who invest in that program.