May 24, 2017

DC school busWashington D.C. residents have long been underserved and underrepresented. While we don’t have any updates on representation, we do have good news about college saving options for DC residents, and associated tax benefits.

Washington D.C.’s College 529 Plan recently introduced changes to add stronger investment choices and reduce fees. This is a great saving recipe if you’re a D.C. resident saving for college and seeking to gain D.C. income tax deductions too.

DC 529 College Savings Investment Choices

The new plan offers three layers of investment options:

Target Date Portfolios

Various portfolios are offered, containing appropriate investment positioning based upon the anticipated year a child will enter college. The portfolios are more aggressive for younger children, and become more conservative as children near age 18 and head off to college.

Individual Portfolios

Accountholders can also create custom investment portfolios, utilizing a mixture of index and actively managed funds, including socially responsible choices. There are eight options in total:

  • U.S. Intermediate-Term Bond Index Portfolio
  • Intermediate-Term Bond Portfolio
  • U.S. Total Stock Market Index Portfolio
  • U.S. Socially Responsible Equity Portfolio
  • U.S. Large Cap Equity Portfolio
  • Non-U.S. Socially Responsible Equity Portfolio
  • Non-U.S. Total Stock Market Index Portfolio
  • U.S. Small Cap Equity Portfolio

Principal Protected Portfolios

For those less inclined to invest, the new plan also offers an option akin to a savings account, with a modest interest rate.

Lower Costs And Fees

The new plan is specifically designed to reduce fees. Depending on the investment options you select, the annual fees based upon the assets held in the plan will range from 0.15% to 0.80%. For example, if you invest $1,000, your annual asset-based fee could range from $1.50 to $8.00. This is well worth the investment, particularly considering the tax savings.

Washington, D.C. Tax Incentives

While the DC Section 529 plan’s investment options are improving, and its fees are decreasing, associated tax advantages remain the same. Nonetheless, they still offer an extra investment incentive which, remember, isn’t limited to parents only; grandparents and others can establish and contribute to a 529 plan for a cherished child.

As a recap, each taxpayer can deduct up to $4,000 per year, regardless of the number of beneficiaries. Married couples filing jointly can deduct up to $8,000 (if each taxpayer owns an account). Payments in excess of $4,000 per tax payer can be deducted from D.C. income in future years, for up to 5 years.

SageVest Wealth Management is committed to helping you and your family plan for important life events, and saving for college is often top of the list. We can help you to evaluate your college savings options, helping to support your goals for the next generation’s future as part of your broader wealth management objectives. Please contact us for more information if you’re interested in saving supporting your child, grandchild, niece, nephew or other family member’s academic success.

Prepared by SageVest Wealth Management, a DC based fee only financial planner. Copyright 2017.


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