529 plan help for new parents!!!

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beachbum5011
Posts: 41
Joined: Thu Apr 06, 2017 8:26 am

529 plan help for new parents!!!

Post by beachbum5011 »

Looking for some 529 assistance. I currently want to start funding for our newborn. We just moved to NJ and diving into the state plan (NJBEST), it does not look so advantageous to join. Our family would not qualify for state income tax deductions of $10,000 per year.

We have a rental property in PA and wonder if we can take advantage of the 529 state plan there? Pennsylvania taxpayers can deduct up to $15,000 in contributions per beneficiary per year ($30,000 if married filing jointly, assuming each spouse had income of at least $15,000) from their Pennsylvania taxable income for the purposes of determining their state income taxes.

If neither is an option, what is the ideal out-of-state plan???
LiveItUpBySaving
Posts: 13
Joined: Mon Oct 31, 2016 11:06 am

Re: 529 plan help for new parents!!!

Post by LiveItUpBySaving »

My family uses the PA 529 Plan and it fits our needs. The costs have continued to come down every year and are comparable to lots of other states now. We just set it for S&P equivalent and forget it. Easy Win.
pizzy
Posts: 509
Joined: Tue Jun 02, 2020 6:59 pm

Re: 529 plan help for new parents!!!

Post by pizzy »

beachbum5011 wrote: Tue Nov 23, 2021 9:59 am Looking for some 529 assistance. I currently want to start funding for our newborn. We just moved to NJ and diving into the state plan (NJBEST), it does not look so advantageous to join. Our family would not qualify for state income tax deductions of $10,000 per year.

We have a rental property in PA and wonder if we can take advantage of the 529 state plan there? Pennsylvania taxpayers can deduct up to $15,000 in contributions per beneficiary per year ($30,000 if married filing jointly, assuming each spouse had income of at least $15,000) from their Pennsylvania taxable income for the purposes of determining their state income taxes.

If neither is an option, what is the ideal out-of-state plan???
PA allows the deduction no matter what state’s plan you use.

We chose to use Vanguard.
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anon_investor
Posts: 9487
Joined: Mon Jun 03, 2019 1:43 pm

Re: 529 plan help for new parents!!!

Post by anon_investor »

pizzy wrote: Tue Nov 23, 2021 7:28 pm PA allows the deduction no matter what state’s plan you use.

We chose to use Vanguard.
If that is the case, I suggest the OP use the Vanguard one if they have accounts at Vanguard already, or one of the Fidelity ones if they have accounts at Fidelity.
pizzy
Posts: 509
Joined: Tue Jun 02, 2020 6:59 pm

Re: 529 plan help for new parents!!!

Post by pizzy »

anon_investor wrote: Tue Nov 23, 2021 9:10 pm
pizzy wrote: Tue Nov 23, 2021 7:28 pm PA allows the deduction no matter what state’s plan you use.

We chose to use Vanguard.
If that is the case, I suggest the OP use the Vanguard one if they have accounts at Vanguard already, or one of the Fidelity ones if they have accounts at Fidelity.
In most cases, the taxpayer must contribute to their home state’s 529 plan to qualify for a state income tax benefit. However, there are seven tax parity states that offer a state income tax benefit for contributions to any 529 plan:

Arizona
Arkansas
Kansas
Minnesota
Missouri
Montana
Pennsylvania

Source: https://www.savingforcollege.com/articl ... ally-worth
marcopolo
Posts: 5188
Joined: Sat Dec 03, 2016 10:22 am

Re: 529 plan help for new parents!!!

Post by marcopolo »

beachbum5011 wrote: Tue Nov 23, 2021 9:59 am Looking for some 529 assistance. I currently want to start funding for our newborn. We just moved to NJ and diving into the state plan (NJBEST), it does not look so advantageous to join. Our family would not qualify for state income tax deductions of $10,000 per year.

We have a rental property in PA and wonder if we can take advantage of the 529 state plan there? Pennsylvania taxpayers can deduct up to $15,000 in contributions per beneficiary per year ($30,000 if married filing jointly, assuming each spouse had income of at least $15,000) from their Pennsylvania taxable income for the purposes of determining their state income taxes.

If neither is an option, what is the ideal out-of-state plan???
PA gives the tax break regardless of which state's plan you use. But, I don't think it will help you. You will get the reduction on the PA income tax, but I believe NJ will also tax the rental income from PA. You will get a credit for the taxes paid to PA, but will owe the difference. If you save taxes in PA, you just end up paying more to NJ.

At least, that is my understanding of how the NJ state income tax works or income taxed in another state.

If you don't qualify for a NJ tax break, you should invest in the best 529 that fits your need without any concern of the state sponsor.
Once in a while you get shown the light, in the strangest of places if you look at it right.
brianH
Posts: 646
Joined: Wed Aug 12, 2009 12:21 pm

Re: 529 plan help for new parents!!!

Post by brianH »

The benefits to a PA 529 plan (vs. other states) is that the money doesn't count against you for state-based financial aid and the assets are protected from creditors and exempt from the inheritance tax.

The target-date PA plans are all made from Vanguard funds, and they have a 0.22% ER. Vanguard charges 0.14% directly for theirs. I just went with the PA plan, because I'm not going to worry about a 0.08% ER on relatively small balance account.
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