08 Jun Top Three Reasons to LOVE the South Carolina 529 Plan
You probably are aware that 529 Plans throughout the country help families save for the high cost of college tuition while avoiding taxes on investment gains. However, the South Carolina 529 plan has even more to love.
Unlimited State Tax Deduction
What you may not know is that residents in South Carolina that are contributing to South Carolina’s 529 plan (aka “Future Scholar”), can also enjoy an “unlimited” deduction on SC state income tax. That’s right: if you file income taxes in South Carolina as a resident you can take advantage of an above the line deduction on your income taxes for the amount that you contribute to the Future Scholar program. There is also no income phase-out or limits for this deduction which makes it a great option for high income parents or grandparents.
Extended Tax Deadline
If you did not contribute to a 529 in 2017 you still have time to take advantage of this tax deduction as long as a contribution is made before April 17th 2018. South Carolina is one of the few states that allows 529 contributions in 2018 (before tax filing deadline) to be deducted from 2017 income taxes. If you are anticipating a tuition payment this fall it might make tax sense to contribute that amount to a 529 before April and receive a deduction on your state income taxes.
Private School Tuition Included
The passing of the recent Tax Cuts and Jobs Act also liberalized the rules on how 529 plan funds can be used, extending them for the first time to private K-12 school tuition. Many South Carolina families choose private school as an option; they now have an excellent tax advantaged way to fund this. For example, if someone in the top 7% tax bracket for South Carolina state income tax contributed $10,000 today in anticipation of a tuition bill in the fall they would save $700 of their tax bill this year. Withdrawals are limited to $10,000 a year for K-12 tuition expenses, however withdrawals are not limited to $10,000 for college qualifying expenses.
There are a lot of different factors to consider when contributing to a 529 plan and we recommend speaking to a Certified Financial Planner™ before making an education savings decision. If you have questions about this please contact our South Carolina office!