Edvest 529 Tax Benefits – What They Are and Why You Should Invest

published March 15, 2023

If you’re reading this article, you’ve likely heard about Edvest 529 as a tool that can help you save for higher education. But did you know about the triple tax benefits you can receive when investing with Edvest 529?

By paying fewer taxes, Wisconsin taxpayers can earn more and grow their accounts faster, giving their child or grandchild an even bigger head start in paying for their higher education. Edvest 529’s triple tax benefits include the following:

1. Wisconsin State Income Tax Deduction
2. 100% Tax-Deferred Growth
3. Tax-Free Withdrawals for Qualified Education Expenses

Now, let’s dive deeper into each tax benefit and why you should consider saving with Edvest 529.

What is Edvest 529’s State Income Tax Deduction?

Simply put, a state income tax deduction is when you can deduct contributions to your Edvest 529 account(s) from your Wisconsin state income taxes.

Wisconsin taxpayers who contribute to an Edvest 529 account, regardless of their relationship to a child, can deduct up to $3,560 annually per beneficiary from their 2022 Wisconsin state income taxes ($1,780 for married filing separately and divorced parents of a beneficiary). Parents, grandparents, other family members and even friends have until Tuesday, April 18, 2023, to contribute to an existing Edvest 529 account or open a new account to be eligible for the 2022 state income tax deduction. Limitations apply.

Contributions greater than the maximum deduction amount may be carried forward as a deduction in future tax years and can be subject to the maximum deduction amount. This applies to everyone — parents, grandparents, aunts, uncles and friends — not just the account owner.

What is Tax-Deferred Growth?

With a tax-deferred account, you won’t pay annual federal or state taxes on any earnings, which can help an account owner potentially grow their account faster. Over time, an Edvest 529 account allows you to put more toward your child’s higher education funds by taking advantage of the power of compound earnings.

What are Tax-Free Withdrawals?

Account owners can withdraw funds tax-free when paying for qualified education expenses at any accredited public or private university, college, technical college, community college or professional school nationwide, and many schools abroad.

Qualified higher education expenses may include the following:

• Tuition
• Certain room and board expenses
• Books and supplies
• Computers and related tech – such as internet access fees, software or printers
• Apprenticeship Programs registered and certified with the Secretary of Labor under the National Apprenticeship Act¹
• Student loan repayment is subject to a lifetime limit of $10,000 per individual when using a 529 plan
• Up to $10,000 per year for K-12 public, private or religious schools

When funds are used to pay for K-12 tuition and registered apprenticeship program expenses, withdrawals are free from federal and Wisconsin income taxes. Not all states treat K-12 tuition and registered apprenticeship program expenses as qualified expenses. If you are not a Wisconsin taxpayer, withdrawals for these expenses may be subject to state income taxes, a nonqualified withdrawal penalty and may include recapture of any tax deductions claimed.

If the beneficiary is a special needs student, any additional costs required for enrollment or attendance to meet those needs will also be treated as a qualified higher education expense.

Why is 529 Gifting a Tax Benefit?

Another tax advantage of the 529 plan is no federal gift tax on contributions up to $17,000 per year for single filers and $34,000 for married filers.

This means you could make a one-time gift equivalent to the five-year amount, and it could all qualify for the federal gift tax exclusion. If pro-rated over five years, there’s even an option to gift up to $85,000 for single filers and $170,000 for married filers. This amount is subject to “add-back” in the event of the participant’s death within five years and assumes no other gifts are made to the same beneficiary during the same period. Consult your tax advisor for more details.

Receive Edvest Tax Benefits Today

Don’t miss out on paying fewer taxes while saving for higher education. Get more bang for your buck while taking advantage of triple tax benefits from Edvest 529.

To open an Edvest 529 account and to learn more about tax benefits, visit Edvest.com.

About Edvest 529

Edvest 529 is Wisconsin’s direct-sold 529 college savings plan designed to help families save for more than 25 years of higher education expenses. Account owners can choose from 24 investment portfolios, access easy-to-use savings tools and take advantage of in-state tax benefits for Wisconsin taxpayers.

Edvest 529 is a tax-advantaged investment, meaning contributions to an account may qualify for a 2022 Wisconsin state income tax deduction of up to $3,560 per beneficiary, per year. Limitations apply. The plan has no sales charges, enrollment fees, or annual account maintenance fees. In fact, Edvest 529 is the sixth lowest-cost 529 college savings plan in the nation!²

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Footnotes

1. To learn more about Wisconsin's Edvest 529 College Savings Plan, its investment objectives, risks, charges and expenses please see the Plan Description at Edvest.com. Read it carefully. Wisconsin taxpayers can qualify for a 2022 state tax deduction of up to $3,560 for each contributor per beneficiary per year from contributions made into an Edvest College Savings Plan (married couples filing separately and certain divorced parents may each claim a maximum of $1,780). Wisconsin taxpayers can qualify for a 2023 state tax deduction of up to $3,860 for each contributor per beneficiary per year from contributions made into an Edvest College Savings Plan (married couples filing separately and certain divorced parents may each claim a maximum of $1,930). Investments in the plan are neither insured nor guaranteed and there is the risk of investment loss. Check with your home state to learn if it offers tax or other benefits such as financial aid, scholarship funds, or protection from creditors for investing in its own 529 plan. If the funds aren't used for qualified higher education expenses, a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. Consult your legal or tax professional for tax advice. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, is the distributor and underwriter for the Edvest 529 College Savings Plan.
2. ¹Withdrawals for tuition expenses at a public, private or religious elementary, middle, or high school, registered apprenticeship programs, and student loans can be withdrawn free from federal and Wisconsin income tax. If you are not a Wisconsin taxpayer, these withdrawals may include recapture of tax deduction, state income tax as well as penalties. You should talk to a qualified professional about how tax provisions affect your circumstances. K-12 withdrawals are limited to $10,000 per year for K-12 tuition. Apprenticeship programs must be registered and certified with the Secretary of Labor under the National Apprenticeship Act. Student loan repayment subject to a lifetime limit of $10,000 per individual when using a 529 plan.↩
3. ²ISS Market Intelligence 529 College Savings Fee Analysis 4Q 2022. Edvest’s average annual asset-based fees are 0.16% for all portfolios compared to 0.51% for all 529 plans.↩

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