With tax season in full swing, many Americans are planning to take advantage of every deduction and exemption available. A 529 plan with The Education Plan® can help you save on your taxes and help you save for future education at the same time. Let us walk you through the tax savings and benefits.

An Opportunity for a Range of Tax Savings

A 529 plan is a tax-advantaged education savings plan that can be used to pay for a wide range of qualified education expenses for your child or loved one, including tuition, room and board, books, computers, and more. Money invested in a 529 plan can be used at any accredited college or university, trade, or professional school. Funds can also be used to pay for K–12 tuition, apprenticeship programs, and student loan repayment.

Apart from being a flexible savings account that helps you save for a loved one’s future education; a 529 plan offers a wide range of tax benefits including:

• Tax-advantaged growth: Earnings on a 529 account are not subject to federal taxes when used for qualified education expenses. This means that you will pay no federal income tax on earnings as your account grows over the years.
• State tax incentives: Many states offer additional tax benefits, either in terms of a tax deduction or a credit for contributions into a 529 account. In New Mexico, any contribution to your 529 account with The Education Plan is eligible for deduction from your New Mexico state taxable income each year.
• Gift tax benefits: A contribution to a 529 plan is considered a completed gift from the contributor to the beneficiary for gift tax purposes. In 2024, the first $18,000 ($36,000 for a married couple filing jointly) given to each beneficiary (annual basis) is excluded from federal gift taxes. A special provision in the IRS code allows for five-year accelerated gifting to a 529 plan. This means you can contribute up to $90,000 for a single contributor (or $180,000 for married couples) in 2024 and apply it against the annual gift tax exclusion equally over a five-year period. This can be a beneficial estate planning tool. We recommend consulting with a tax advisor about gift taxes and your specific situation before investing.
• Tax-free withdrawals: Withdrawals from a 529 account are tax free as long as they are used for qualified education expenses.

Your Tax Refund: Multiply the Savings

For the 2022 tax year, the IRS estimated that the average refund was $3,121. Many families see a sizeable tax refund as an opportunity to make a single large purchase or fund a vacation. This year, instead of spending your refund, consider investing it in a 529 education savings account with The Education Plan. The benefits can pay off for years to come.

• Boost your savings with a lump-sum payment.
• If you’re a New Mexico taxpayer, the amount you contributed in 2023 is deductible on your state income tax return for that year, multiplying your savings.
• Earnings on your contribution will be tax-free, and withdrawals will be tax free as long as they are used for qualified education expenses.

It’s Never Too Late to Get Started

When you save for future education with a 529 account with The Education Plan, it not only helps you prepare for future education expenses, but also offers significant tax benefits. Ready to get started? You can open an account in about 15 minutes with no initial minimum contribution required.