A head start for college savings in 2016

Give your child’s college savings a head start with $529 to open or add to a College SAVE account. College SAVE is North Dakota’s 529 plan, administered by Bank of North Dakota, which helps families save for college with special incentives.

A College SAVE account offers a number of tax advantages to help you get the most out of your college savings.

  • Tax benefits: Earnings grow tax-deferred and are federal and state tax-free when used for qualified higher education expenses at private or public colleges and universities, in-state or out-of-state. NEW FEATURE! Assets can now be used to purchase computer equipment, software and internet access when a person is enrolled in college.
  • State tax deduction: ND taxpayers can deduct College SAVE contributions up to $5,000 (up to $10,000 if married and filing jointly) from ND state taxable income. You do not need to be the account owner to take advantage of this tax deduction.
  • Gift and estate tax benefits
    • Gift-tax free: You can contribute up to $28,000 if married, filing jointly ($14,000 if single) per designated beneficiary each year without incurring gift taxes.
    • Accelerated gifting: There is also a special provision that lets you make up to five years’ worth of gifts to your designated beneficiary in one year without incurring gift taxes ($140,000 if married, filing jointly; $70,000 if single) and elect to apply the contribution against the annual exclusion equally or over a five-year period.

College SAVE offers grant programs

Children FIRST gives a dollar-for-dollar match up to $200 to North Dakota newborns 12 months old or younger. You must start the account before the child’s first birthday and you have 12 months to make contributions to receive the entire match.

North Dakota Matching Grant Program gives a dollar-for-dollar match up to $300 for residents earning less than $80,000 annually ($120,000 if married and filing jointly). Residents earning less than $60,000 ($80,000 if married and filing jointly) can get up to $300 per year for three consecutive years. Beneficiaries must be 15 years old or younger when you first apply and you have 12 months to make contributions to receive the entire match.

Families may qualify for both programs.

These are a few of the frequently asked questions about College SAVE.

What is a 529 plan?

529 plans are tax-advantaged programs that help families save for college. For the most part, 529 plans are sponsored by individual states. The number, 529, comes from section 529 of the Internal Revenue Code that regulates the plans.

How much do I need to open an account?

You can open a College SAVE account with as little as $25.

Who can be the designated beneficiary?

The designated beneficiary may be of any age, from newborn to adult, as long as they have a Social Security number or taxpayer identification number. There are no restrictions on their state of residence or income. You do not need to be related to the designated beneficiary. You can even open a College SAVE account for yourself and benefit from the tax deductions.

What if my beneficiary decides not to go to college?

  • You may choose to leave the money in the account in case the designated beneficiary decides to attend school at a later time. There is no age – or time – limit for using the money.
  • You can change the designated beneficiary on your account at any time provided that the new beneficiary is an eligible member of the family of the former beneficiary. A “member of the family” includes father, mother or an ancestor of either; son, daughter or a descendant of either; stepfather or stepmother; stepson or stepdaughter; brother, sister, stepbrother, stepsister, half-brother or half-sister; brother or sister of the father or mother; brother-in-law, sister-in-law, son-in-law, daughter-in-law, father-in-law or mother-in-law son or daughter of a brother or sister; spouse of the designated beneficiary or any of the individuals mentioned above; or a first cousin. For purposes of determining who is a member of the family, a legally adopted child or foster child of an individual shall be treated as the child of such individual by blood.
  • You may withdraw the money for a non-qualified expense. If you do so, the earnings portion is subject to federal and state income taxes and may be subject to a 10% federal penalty tax.

The Plan Disclosure Statement provides more information on who qualifies.

What is a 529 plan?

529 plans are tax-advantaged programs that help families save for college. For the most part, 529 plans are sponsored by individual states. The number, 529, comes from section 529 of the Internal Revenue Code that regulates the plans.

How much do I need to open an account?

You can open a College SAVE account with as little as $25.

Who can be the designated beneficiary?

The designated beneficiary may be of any age, from newborn to adult, as long as they have a Social Security number or taxpayer identification number. There are no restrictions on their state of residence or income. You do not need to be related to the designated beneficiary. You can even open a College SAVE account for yourself and benefit from the tax deductions.

What if my beneficiary decides not to go to college?

  • You may choose to leave the money in the account in case the designated beneficiary decides to attend school at a later time. There is no age – or time – limit for using the money.
  • You can change the designated beneficiary on your account at any time provided that the new beneficiary is an eligible member of the family of the former beneficiary. A “member of the family” includes father, mother or an ancestor of either; son, daughter or a descendant of either; stepfather or stepmother; stepson or stepdaughter; brother, sister, stepbrother, stepsister, half-brother or half-sister; brother or sister of the father or mother; brother-in-law, sister-in-law, son-in-law, daughter-in-law, father-in-law or mother-in-law son or daughter of a brother or sister; spouse of the designated beneficiary or any of the individuals mentioned above; or a first cousin. For purposes of determining who is a member of the family, a legally adopted child or foster child of an individual shall be treated as the child of such individual by blood.
  • You may withdraw the money for a non-qualified expense. If you do so, the earnings portion is subject to federal and state income taxes and may be subject to a 10% federal penalty tax.

The Plan Disclosure Statement provides more information on who qualifies.

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