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Educate yourself about school savings plans

Fraser Horn and Dudley IrwinVail, CO, Colorado

The value of a quality education cant be measured in dollars and cents. But for many American families, its one of the biggest financial challenges.Of course, its smart to save as much as possible, as soon as possible. And that goal just became easier to reach with the Education Savings Account, also known as an education IRA. In the Economic Growth and Tax Relief Reconciliation Act of 2001, Congress enhanced the provisions in these accounts to make them more useful to taxpayers.This legislation allows individuals to save for a childs education expenses with an account that affords tax-free growth and distribution opportunities. Now, anyone parents, grandparents, relatives or friends who wants to make an investment in a childs future can do so.An annual, non-deductible contribution of $2,000 per child can be made until the childs 18th birthday. Special-needs children may be allowed contributions even later. Contributions can be made up to April 15 after the close of the tax year for which the contribution is being made.Congress has also increased the income limits for those contributing to an IRA. For those married filing a joint return, full contributions can be made if you have adjusted gross income of up to $190,000. Single filers with a gross income of up to $95,000 can make a full contribution. Joint tax filers with a gross income of up to $220,000, and single tax filers with incomes up to $110,000 may make reduced contributions.The beneficiary of an Education Savings Account can take withdrawals tax-free until age 30 for all annual qualified education expenses. If these funds are not used in this way, any earnings may be subject to ordinary income taxes plus a 10 percent tax penalty.Among the enhancements included in the legislation, you will find good news for children enrolled in public and private (including parochial) primary and secondary schools. Expenses for grades K through 12 that qualify for payment from these accounts include tuition, fees, books, uniforms, supplies and equipment, transportation, extended-day programs as provided or required by the school, academic tutoring, and the purchase of computer technology, equipment, educational software, and Internet access.Of course, public and private undergraduate and graduate school expenses tuition, room and board, fees, books, supplies, and equipment are also considered qualified expenses to be paid from the accounts.Further good news includes a taxpayers ability to contribute to state-sponsored 529 college savings plans in the same year they contribute to an Education IRA.Please consider the investment objectives, risk, charges and expenses carefully before investing in a Section 529 College Savings Plan. The official statement, which contains this and other information, can be obtained by calling your financial adviser. Read it carefully before you invest.Before deciding on the right savings program for the youngsters in your family, you will want to talk with your tax consultant and your financial adviser. But dont delay. Seize the opportunities available through the Relief Act to build a sound education plan for your family.Our firm does not provide tax or legal advice. Be sure to consult with your own tax and legal advisers before taking any action that would have tax consequences. The Economic Growth and Tax Relief Reconciliation Act of 2001 is subject to a sunset provision. The provision (required by the Congressional Budget Act of 1974) requires that the provisions of the Act do not apply after the end of the year 2010. Therefore, technically, all the 2001 rules, rates, and exemptions come back into effect in 2011. The accuracy and completeness of this material are not guaranteed. The opinions expressed are those of Fraser M. Horn and Dudley M. Irwin and are not necessarily those of Berthel Fisher or its affiliates. The material is distributed solely for information purposes and is not a solicitation of an offer to buy any security or instrument or to participate in any trading strategy. Provided by courtesy of Fraser M. Horn and Dudley M. Irwin, representatives with Berthel Fisher in Edwards.Registered representatives of and securities offered through Berthel Fisher & Company Financial Services, Inc. Member NASD/SIPC. 1st & Main Investment Advisors is independent of BFCFS.


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