Author: Deborah Goodkin, Managing Director, Savings Plans, First National Bank of Omaha
Holiday season is in full swing, and along with it comes many important lists: wish lists, gift lists, guest lists, chore lists, grocery lists and more. Lists are important—they help us remember what matters when things get busy. That’s why NEST 529 wants to make sure you’re also thinking about your financial checklist.
Still working on it? Not to worry, we have one prepped and ready to go. All you have to do is check it twice, to help ensure you get the most out of your savings this holiday season.
Save Big on State Income Tax
As the year comes to a close, make sure to take advantage of NEST 529’s state income tax benefits. Account Owners in Nebraska are eligible for an annual state income tax deduction of up to $10,000 for NEST 529 contributions, or $5,000 per spouse if filing separately.
To take advantage of the Nebraska state income tax deduction this year, your contribution must be submitted online or postmarked by December 31 before 10:59pm CT, as well as reported on your Nebraska state income tax return.
New to Nebraska? Funds rolled over into a NEST 529 account from an out of state 529 plan are also eligible for the Nebraska state income tax deduction, so consider transitioning your current 529 accounts to NEST 529 to maximize your savings.
Account Owners living outside of Nebraska have options as well— offer a tax benefit even if Account Owners are investing in another state’s plan. Consult with a financial advisor or tax professional to determine your eligibility for state tax benefits.
Share the Journey with Gift Contributions
The holidays are all about sharing love and support with friends and family. This year, encourage loved ones to give a gift that will last a lifetime: the gift of education.
Through Ugift, your NEST 529 account is assigned a unique code that can be used to make contributions with a check or electronic transfer. Unlike many other gifting programs, gift givers don't have to join, register or pay a service fee, and they don’t need any additional information about your account.
With a gift certificate contribution, loved ones can fill out and mail a contribution coupon to NEST 529, and download and print a card to give you or your child for the occasion.
Leverage Tax-Smart Gifting
If you or a loved one plans to make a big contribution this holiday season, make sure to take advantage of the available tax benefits. Though 529 contributions are considered gifts to the beneficiary, they also qualify for the annual gift-tax exclusion, which for 2019 is $15,000 total per person for each beneficiary, or $30,000 if filing jointly. That means that you can make significant contributions to your college savings without triggering a gift tax.
Those who wish to contribute above the limit can also take advantage of five-year gift forwarding, which allows access to gift tax and estate planning benefits as long as the total gifted amount over five years does not exceed $75,000, or $150,000 if filing jointly. Keep in mind, these tax benefits are subject to change if the Account Owner dies before the end of the five-year period. In addition, in Nebraska the annual state income tax deduction is still capped at $10,000, and those larger contribution amounts will not count toward future years’ tax deductions.
Take Advantage of Tax-Deferred Growth
One of the greatest advantages to saving with NEST 529 is that Account Owners benefit from compounded, income tax-deferred growth, or “growth on growth.” Because NEST 529 account earnings are state and federal income tax-deferred, the full earnings amount remains in your account and grows with no money being subtracted to pay current tax obligations. That means earnings happen more tax efficiently, helping to increase your account value even faster and maximize earnings potential associated with market growth.
Spend Where it Counts with Tax-Free Withdrawals
When the time comes to use the funds in a NEST 529 account, withdrawals used for qualified educational expenses are tax-free. While planning payments, make sure to direct your NEST 529 funds to these qualified expenses to optimize your savings.
What’s considered a qualified educational expense? Many expenses required for enrollment or attendance at a qualified institution fall into this category, including tuition and fees, books, supplies, necessary technology and even room and board on and off campus (if enrolled at least half-time).
Happy holidays, and happy saving! If you have any questions regarding your account, contact the NEST 529 team at email@example.com or by calling 1-888-993-3746.