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Reducing Taxes and Saving for an Education

The government also encourages us to prepare for the costs of education with 529 plans and Education Savings Accounts.

529 plans are kind of like a ROTH for post-secondary education. You contribute after-tax money and as long as the withdrawals are used to pay for qualified Higher Education expenses, YOU NEVER PAY TAXES AGAIN!

NOTE: Using your state’s plan may qualify you for a state income tax deduction on dollars contributed.

Educational Savings Accounts are also like ROTHs… unlike the 529 plan, withdrawals can be used to pay for primary and secondary education as well as college and post graduate education. However, we find their use to be limited because of low contribution limits and limited amount of time for growth for primary and secondary education purposes.

 

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