May 2008 -  Are you looking for a way to save for your grandchildren’s college education and save on your own taxes? New York State’s 529 College Savings Program could be the answer.  Below, are some frequently asked questions with answers about the 529 College Savings Plan.

Q.    Who can open a 529 College Savings Program account?
A.    Anyone (parents, grandparents, aunts, friends, etc.) can establish an account, regardless of state residence.

Q.    What are the tax benefits of the 529 Program?
A.     New York taxpayers can receive a New York State income tax deduction for contributions of up to $5,000 annually (up to $10,000 for married couples filing jointly). All account owners benefit from tax deferral of earnings on contributions.

Q.    How much can I contribute to the 529 Program?
A.    Open an account with $25 and make additional contributions of at least $25 by check or automatic deduction from a bank account.  Contributions to all accounts for any beneficiary are subject to a lifetime contribution maximum of $100,000.  Additional contributions will not be permitted if all accounts for the same beneficiary total $235,000 (current maximum account balance).

Q.    Are the funds limited to use at New York State colleges?
A.    Funds can be used at eligible schools anywhere.

Q.    Is there an application fee for the 529 Program?
A.    There are no application, maintenance, or transaction fees. A management fee of 0.60% covers all costs.

Q.    What can the money in the account be used for?
A.    The 529 Program is designed to pay for qualified higher education expenses, including tuition, fees, supplies, books, and equipment required for enrollment at eligible undergraduate, graduate or professional institutions of higher education and business, trade, technical or other occupational schools. Most room and board expenses are also covered for students enrolled at least half time.

Q.    I have more than one child. Should I open an account for each of those children?
A.    Yes. Each account can only have one designated beneficiary. You could also open an account for one child and at a later date change the designated beneficiary to another member of the child's family.

Q.    Can I open an account for a high school-age child?
A.    Yes. There are no age restrictions, but generally the account must be open for at least 36 months before withdrawals can be made without penalty.
 
Q.    Do I have to be related to the designated beneficiary?
A.    No. You may designate anyone, including yourself. The tax benefits are not contingent on the beneficiary being a family member of the account owner.

Q.    What if the beneficiary decides not to go to college or does not finish college?
A.    Funds may be left in the account for the current beneficiary in the event he or she returns to school. Or you can designate a member of the beneficiary's family as the new beneficiary. Lastly, the money could be withdrawn. Generally, however, the entire withdrawal will be subject to New York income tax. Earnings will be subject to federal income tax as well as a 10% additional federal tax.
 
Q.     How can I get started?
A.    Additional information about the 529 College Savings Program is available by calling toll free 1-877-NYSAVES or by checking out their web site at www.nysaves.org.