Would you rather spend your money on taxes, or on tuition?

CollegeBound Saver offers several tax advantages that can benefit you even before your child or grandchild goes to college. These include:

  • A special Rhode Island tax deduction. Rhode Island taxpayers who are account owners are eligible for a deduction in computing state income tax of up to $1,000 for married couples filing jointly and $500 for individual filers for contributions to their CollegeBound Saver account.1
  • Tax-deferred growth. Earnings grow tax deferred from federal and state taxes.
  • Tax-free distributions. Distributions for qualified expenses are exempt from federal and state tax.2
  • Gift-tax benefits. Contributions qualify for the current federal $15,000 annual gift exclusion.
  • Estate planning benefits. Reduce your personal taxable estate by making five years' worth of gifts (currently up to $75,000; $150,000 for married couples filing jointly) in one lump sum.3

Important Tax Legislation Information
On December 22, 2017, the president signed new tax legislation into law. We're working on updating our website to reflect the new U.S. tax laws. In the meantime, the website may not address the changes.

The legislation includes the following several new provisions related specifically to 529 plan accounts, beginning with the 2018 tax year:

  • Account owners can use assets to pay for qualified K-12 expenses up to $10,000 per year per student.
  • Account owners can treat K-12 withdrawals as qualified expenses with respect to the federal tax benefit. The tax treatment of such withdrawals at the state level may be determined by the taxpayer's state of residence. Account owners should consult their tax advisors for further guidance.
  • Account owners can roll over 529 plans to ABLE plans, up to the ABLE annual contribution limit. States may need to expand the definition of qualified withdrawals to include rollovers into ABLE plans. Without a change to the definition, such rollovers could be categorized as nonqualified withdrawals.

We'll provide more information as additional details about the effects of the tax bill become clear. We encourage you to consult a qualified tax advisor about your personal situation.

 

 

 

1Subject to certain conditions and requirements, contributions in excess of the annual limit can be carried forward and deducted in future years. If an account owner makes a non-qualified distribution or certain transfers or rollovers to another state’s program, the amount of the deduction may be “recaptured” and included in the account owner’s Rhode Island income.

2Earnings on non-qualified distributions may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain distributions are subject to federal, state, and local taxes.

3In the event you do not survive the five-year period, a pro-rated amount will revert back to your taxable estate.