By Johnny Jackson
Georgia taxpayers stand to benefit, long-term, on post-secondary education this tax season, according to tax officials.
"Tax time is the perfect time to begin thinking about budgets, investments and financial planning for the future," said Chuck Penuel, director of the Georgia Office of Treasury's Path2College 529 Plan.
Thousands of college savings account holders in Georgia are benefiting from tax-free incentives and deductions, he said. About 110,000 savings accounts exist through the Path2College 529 Plan, the state's tax-free college savings initiative, created under the federal Qualified Tuition Program.
Penuel said the state's Path2College 529 Plan -- managed by financial services company, TIAA-CREF (Teachers Insurance and Annuity Association, College Retirement Equities Fund ) Tuition Financing, Inc. -- saves taxpayers from paying taxes on interests accrued, and withdrawn, from their college savings.
"A college investment pays for itself, and you can see the value of your investment over a lifetime," Penuel said. "And with the cost of college rising each year, it's important to start early and save consistently to help offset those costs.
"It may not be realistic for families to try to save for 100 percent of the cost of college for each of their children," he continued. "But, by contributing small amounts over a long period of time, families can achieve significant savings in the long run, and any amount saved may be that much less you, or your child, must borrow for college."
Through the Path2College 529 Plan, taxpayers can also receive a state income tax deduction of up to $2,000 per year, Penuel said. The tax deduction is available for contributions to new accounts or to existing accounts, and is based on the amount of savings that account holders earn, without regard to their annual income.
"The good part about it is that a lot of folks benefit from this, long-term," said Mark Green, spokesman for the Internal Revenue Service.
Path2College 529 Plan college savings accounts have become increasingly popular for families with college-bound students, said Green, who noted that other tax credits exist for college students and their families which add up in the long run.
The interest paid on student loans may be deducted through the American Opportunity (Tax) Credit. He said the new tax credit, passed into law in 2009, provides up to $2,500 in potential tax deductions for educational expenses, over a maximum of four years.
Green said the American Opportunity Credit replaced the Hope Credit of 2008, which only provided up to $1,800 in deductions, for fewer years and fewer taxpayers. The 2009 credit expands the income guidelines for potential credit beneficiaries, and what education-related items can be listed as deductions.
"We strongly suggest that individuals visit our web site [ at www.IRS.gov] for updated and current information on education tax credits and deductions," Green said.
Those wanting to learn more about the Path2College 529 Plan, are asked to visit the Path2College 529 Plan web site, at www.Path2College529.com, or call (877) 424-4377, toll free.