Missouri Advisor 529 Plan

2019/09/06

Missouri’s 529 is a savings plan that helps individuals and families to save for college expenses of their children, grandchildren and so on.

It is a tax based investment solution sponsored by State of Missouri administered by Upromise Investments, Inc., and Upromise Investment Advisors, LLC.

Eligibility

Account can be opened by any U.S. citizen as well eligible resident alien having a social security number or taxpayer identification number. Contributions to this plan can be made by any person and is not dependent on the earnings.

Investment Options

It offers both age based and investment based options. A total 17 different plans are available under the program. These investments are managed by Vanguard. Minimum Initial contribution to be made is $ 25 to open the account.

Advantages/Tax Benefits

Main advantage that this scheme offers is in the form of tax advantages that can be derived out of it. No tax is levied when withdrawals are made from this account for meeting qualified higher education expenses. Deductions can also be claimed by the account holder upto an amount of $ 8,000 in any taxable year. Further it gives you an option to treat a single contribution of $ 65,000 as if it were made for of period of five years, that is, it allows you to spread the benefits of this single investment over a period of five years.

Payment Mode

Deposits to this account can be made through any mode. Even third party cheques are also permitted upto $ 10,000.

Photo Credit: Educationnews.org

However contributions cannot be made through cash, credit cards, money orders etc.

Withdrawal Options

Request for withdrawal can be made online or through telephone or even by mail.  Withdrawals used for the purposes of meeting qualified higher education costs are free from any tax liability and are known as qualified withdrawals. However where funds are withdrawn for any other purpose, any earnings made on deposits till date becomes liable to tax and is treated as income of the person who receives it. Moreover earnings will be subject to an additional penalty tax of 10%. Such withdrawals are called non qualified withdrawals.

To understand the kind of withdrawals exempt from tax, let us see what all is included in qualified withdrawals. Any withdrawal for the purpose of meeting expenses in the nature of tuition, fees, books, room and board costs, supplies and any equipment required for the purposes of enrollment or attendance will be considered as a qualified withdrawal. All these expenses can be met out of withdrawals only in respect of eligible educational institutions. Further it is important to note that room and board expenses are considered as eligible only if beneficiary under the program is enrolled for at least half time.

Assoicated Risks

Investment in this plan is not risk free. There is a possibility that tax laws may change from time to time both at federal and state level. Possibility of losing invested money is also there due to market factors. If any change is made at the plan level including the fees structure, investor may have to comply with new requirements and the benefit that was initially expected out of the program may not be completely realised. These are some of the basic risks that should be kept in mind while making investment under this scheme. Further tax planning is not done at an individual level, hence it is always appropriate to take advice of tax consultant to derive maximum benefits out of this plan.

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