College Savings: A Gift Idea That Lasts For Years
Saving for college this holiday season could also reduce taxes and borrowing
Amid the holiday hustle and bustle, why not consider the gift of a college education to a child you know? According to a recent survey of parents, 84% said they would welcome college contributions in lieu of traditional presents1.
Need more incentives to give the gift of college? Savings deposited into a Massachusetts U.Fund 529 College Investing Plan®may qualify the account owner for a tax break. To be eligible for the deduction this tax year, any contributions must be made into a new or existing college savings account by the end of December.
"Saving for college is one of the best ways to reduce the amount of college loans that students and families borrow, and the Commonwealth provides a college savings state tax deduction to make it easier for families to save," said Thomas Graf, Executive Director of MEFA, the state's authority on planning, saving, and paying for college and steward of the U.Fund as well as the Massachusetts U.Plan Prepaid Tuition Program.
Giving the Gift of College
While 84% of parents said they would welcome college contributions in lieu of a traditional holiday gift, only 29% have actually asked for these types of gifts1. It's easy to set up a U.Fund college gifting page that connects directly to a specified account, and account owners can simply share the link for gift-givers to contribute.
Of those surveyed, 84% of parents said that contributions towards a college education were one of the best gifts they had ever received,according to the 2018 Colleges Savings Indicator Survey by Fidelity Investments, who manages the MEFA U.Fund2.
For more information about setting up a U.Fund college gifting page, visit fidelity.com/collegegift.
Tax Deduction Results in Increased Savings
More Massachusetts families are saving for college than ever before since a state tax deduction took effect in 2017. And the number of new U.Fund 529 accounts opened in 2018 is surpassing the incredible growth seen in 2017.
The U.Fund saw a 12.6% increase in new accounts opened in the first three quarters of 2018,compared to the first nine months of 2017. Comparatively, the total number of new accounts opened in the first three quarters of 2018 is 16% higher than the total number of accounts opened in all of 20163.
The total dollars saved for college increased as well, up 43% from Q3, 20163.
The college savings state tax deduction has allowed thousands of families to benefit from saving for college while also planning for their children's future. U.Fund and U.Plan account owners are eligible to claim up to a $1,000 deduction for a single filer and up to a $2,000 deduction for married persons filing jointly for college savings deposited during the tax year. For detailed guidance on how to claim this deduction, please check with a tax consultant.
The Commonwealth's College Savings Plans
The U.Fund allows families to save for college with tax-free earnings and tax-free withdrawals when used to pay for qualified educational expenses. There is no minimum contribution needed to open an account. To learn more about the U.Fund and all its benefits, visit fidelity.com/ufund.
The U.Plan allows families to prepay college tuition and mandatory fees at over 70 public and private colleges and universities across Massachusetts while locking in current prices. As one of the most stable and reliable prepaid plans in the nation, the U.Plan has no fees, no Massachusetts state or federal taxes on earnings, and also qualifies Massachusetts residents for the college savings state tax deduction. To learn more about the U.Plan and its benefits, visit mefa.org/uplan.
MEFA is a not-for-profit state authority, not reliant on state or federal appropriations, established under Massachusetts General Laws,Chapter 15C. MEFA's mission, since its founding in 1982, has been to help Massachusetts students and families access and afford higher education and reach financial goals through education programs, tax-advantaged savings plans,low-cost loans, and expert guidance. All of MEFA's work aligns with the ever-present goal to support the independence, growth, and success of Massachusetts students and families. Visit mefa.org to learn more or follow MEFA on Twitter @mefatweets and on Facebook at mefaMA.
Lisa Rooney, Public Relations Manager
1. Fidelity Investments "2018 Holiday Gifting Snapshot" November 2018.
2. Fidelity Investments 2018 College Savings Indicator Survey" August 2018.
3 .U.Fund Account Data, Fidelity Investments and MEFA, December 2018.