Alabama State Treasurer John McMillan is shown in an undated official photo.
By William Thornton | [email protected]
If you want to give to Alabama’s college savings plan, you’ve got until the end of the month to do so in order to count it on your state income taxes next year.
CollegeCounts 529 is the state’s program allowing parents, grandparents, friends or relatives to contribute toward college counts through an account on behalf of a beneficiary. The money may be withdrawn and used at colleges, universities, trade schools and graduate schools at one-, two- and four-year schools in Alabama and across the U.S., even internationally. That includes vocational, technical, community, public and private colleges and universities.
The money can be used for qualified expenses such as tuition, fees, room and board, books, supplies, and equipment required for enrollment, including computers.
Alabama State Treasurer John McMillan said there are currently about 95,000 accounts in CollegeCounts, with about $2 billion in investments. The money is invested in a portfolio of mutual funds, with more than 30 different options. There is no entry fee.
“This is really a huge asset,” McMillan said. “College debt in Alabama is substantial. We’re looking at something like an average of $31 million statewide in student debt. So this is a way to offset or prevent that kind of debt for someone at a point of their life, after finishing up school, who is looking to get married, move or start a career.”
Under Section 529 of the IRS tax code, special tax benefits are provided to families saving for future college expenses. Taxpayers can take advantage of a deduction of up to $10,000 for married couples filing jointly or $5,000 for individuals on contributions they make each year.
Investors can enroll in an automatic investment plan that gives a predetermined amount each month. Those interested in enrolling in an account can also think of them as Christmas gifts.
“What I encourage people to do is start early and make regular contributions,” McMillan said. “If you give them clothes, they’re going to outgrow them. If you give them toys, they’re either going to be obsolete or they’ll tear them up. Down the road, they’ll appreciate this.”
To qualify for the tax exemption, contributions must be made to new or existing accounts by Dec. 31. McMillan said accounts can be set up in as little as 15 minutes through the website. Potential investors can also call (866) 529-2228 or visit their personal financial professionals for information.
There is also a CollegeCounts Scholarship, which has awarded more than $4.5 million to 1,300 students over the past four years.
McMillan said two scholarships are offered to each county, but some counties don’t even get applicants. The scholarship awards $4,000 for four-year college enrollees and $2,000 for two-year. The award is one-time, non-renewable and granted on a semester basis in the first academic year.
Applications are open through Feb. 27, 2020.