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Tax Advantages of the Georgia Path2College 529 Plan

The Path2College 529 plan is an education savings plan operated by the state of Georgia and designed to help families set aside funds for future college costs. The are several tax advantages to this plan; first,  the earnings portion of any distributions used to pay for qualified higher education expenses are free from federal and Georgia income tax.  Also, Georgia taxpayers can now contribute and deduct up to $2,000 each year for any beneficiary. Contributions made during the tax year, or before the following year’s federal tax filing deadline are eligible for the deduction. Finally, there are federal estate benefits to the plan as well. Contributions to the plan may reduce the taxable value of the taxpayer’s estate.  For example, contributions to the Plan, together with all other gifts from the account owner to the beneficiary, may qualify for an annual federal gift tax exclusion of $13,000 per donor ($26,000 for married contributors), per beneficiary.

The Path2College plan is flexible; any citizen over 18 can open an account and contribute to the Path2College plan on behalf of the beneficiary. The funds in the account can be used at nearly all higher education institutions (public or private) in the nation and many institutions abroad. Additionally, the funds are not limited to tuition expenses; the funds can be used for books, supplies, and some room and board costs.

The plan offers seven investment options so participants can choose a combination of options that best suits their needs. The plan offers low minimums for contributions so the plan is not overly burdensome for families on a budget. The accounts do have a maximum contribution level of $235,000; however, the account can continue to accrue earnings after it has reached the maximum. An annual asset-based management fee is required to cover the cost of investment management and administrative services. The fee is computed at an annual rate of 0.29%-0.40% of average daily net assets of the account excluding assets held in the Guaranteed Option. For more plan details please visit http://www.path2college529.com/.  Please contact Hoffman & Associates with any questions at 404-255-7400.