tax incentives

6 FAQs About 529 College Savings Plans

College is a large expense and one worth planning for, especially if you want your future college graduate to start their lives with minimal debt. One common way to prepare for such an expense is to open a 529 college savings plan.

Photo by Ruijia Wang on Unsplash

Photo by Ruijia Wang on Unsplash

What is a 529 plan?

College savings 529 plans are state-sponsored savings accounts that offer both tax and financial aid benefits.

What states run a 529 program?  

Almost every state has a 529 program, each with different perks and benefits. You can pick based on perks and you don’t need to live in the state you opened the account in.

You can look at 529 plan options using this tool from SavingforCollege.com.

What are the two types of college 529 plans?

There are two types of 529 plans, they are:

  • College savings plans – This plan is similar to a Roth 401k or Roth IRA by allowing you to contribute after-tax income in the form of mutual funds and other types of investments. There are a number of investment options to choose from and the 529 account will go up and down and value according to those investment choices. The money is this account is available for tuition, books, and often housing.

  • College prepaid tuition-  This plan can be used to pre-pay all or part of the costs of an in-state public college education. Sometimes, they can be converted for use at private or out-of-state colleges.

What are the perks of using a 529 savings plan?

Each state provides slightly different incentives for its 529 programs. But some of the overall benefits include:

  • Large income tax breaks (for federal and often state taxes)

  • The donor stays in control of the account until its use

  • They’re low maintenance

When can you start them?

You can start one of these savings plans at any time. Most 529 programs are “set it and forget it” meaning the investments come straight out of your paycheck or bank account.

Where can I learn more about college 529 plans?

There are a lot of online resources for comparing and ranking different 529 programs. You can reference one of these, or reach out to your friendly neighborhood tax professionals. We can help you select the best option for you.

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3 Reasons to Start a Small Business in Palm Beach, Florida

palm-beach-florida

Not all states are created equal, and in addition to plentiful sunshine, Florida offers quite a few tax advantages for businesses. As of 2016, the incentives fall into three areas: corporate income, insurance premiums, and sales and use. Not only that, starting a small business is relatively easy.

Small Business Regulations Are Minimal

Founding a small business in an area such as Palm Beach, Florida is a breeze, particularly since the county website is so friendly and provides a step-by-step guide of the process. Basically, you need to name your business and check with county officials about zoning, any licenses and any state sales tax issues. Working out of your home is most likely fine, but it is always good to confirm. That’s it! The process for other areas of the state, besides Palm Beach, is relatively similar.

There Is No State Income Tax Unless You Are a C-Corporation

The only Florida businesses that pay taxes are C-corporations, but even then, the taxes are low compared to what C-corporations have to pay in other parts of the country. This means that sole proprietorships and partnerships get huge savings. As for limited liability corporations, they also do not have to pay state tax unless they are one of the infrequent LLCs that has opted for incorporation.

Many Florida small businesses take the form of an S-corporation; it offers the dual benefits of no business tax and quite a few similar legal protections available to C-corporations. However, S-corporation owners do need to pay federal taxes on their S-corporation income.

Tax Incentives Are Varied

Florida provides many tax incentives, such as a research and development tax credit, and a sales tax exemption for industrial machinery and equipment purchases for eligible manufacturing businesses. No matter what type of business you want to go into, there may be a Florida tax incentive for you. Enlist the help of an accountant to learn more, or click on applicable links from the Florida Department of Revenue.

How Herman & Company CPA’s, P.C. Can Help

Herman & Company CPA’s, P.C. offers many solutions for businesses to maximize profit in Palm Beach, Florida. Whether you need assistance with accounting and bookkeeping needs and/or tax planning, Herman & Company CPA’s, P.C. will do a free consultation. Get in touch to see how we can be of service!

 

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.