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

In the complex landscape of financial planning, an Edvest 529 plan stands out as a powerful tax-advantaged tool for saving for college. But what exactly are the tax advantages that an account offers? This article will hopefully clarify how an Edvest 529 account can be an integral part of higher education planning, offering opportunity for both short-term tax advantages as well as long-term financial benefits.

Edvest 529’s triple tax benefits include:

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

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 tax deduction reduces the amount of a taxpayer’s income that is subject to tax.

Wisconsin taxpayers who contribute to an Edvest 529 account, regardless of their relationship to a child, can deduct up to $3,860 annually, per beneficiary, from their 2023 Wisconsin state income taxes when filing jointly (married couples filing separately and certain divorced parents may claim a maximum of $1,930 per beneficiary). Parents, grandparents, other family members, and even friends, have until Monday, April 15, 2024, to contribute to an existing Edvest 529 account - or open and contribute to a new account - to be eligible for the 2023 state income tax deduction.

Also – great news! The Wisconsin state income tax deduction for 2024 has been raised to $5,000 annually per beneficiary for single filers or for married individuals filing jointly, and to $2,500 for married couples filing separately.

Contributions greater than the maximum deduction amount may be carried forward as a deduction in future tax years, subject to the maximum deduction amount. This applies to anyone contributing to an Edvest 529 account — parents, grandparents, and friends — not just the account owner.

What is Tax-Deferred Growth?

The money you contribute to a 529 plan is post-tax dollars, but unlike a traditional savings account, this money is invested and could accumulate earnings over time. Any account earnings in your Edvest 529 account grow tax-deferred – which simply means that payment of taxes on earnings is postponed – or deferred - until a later date.

What are Tax-Free Withdrawals for Qualified Expenses?

The earnings accrued in an Edvest 529 account can be withdrawn from an account tax-free at the state and federal level when paying for qualified higher education expenses.

Let’s explore what that looks like with a simple example.

Let’s say that you originally contributed $1,000 to your Edvest 529 plan. Years down the road, when you are ready to withdraw the money, the account has grown to $1,100 … this means that your tax-deferred earnings were $100.

Now let’s say you withdraw that $1,100 from your 529 account to pay for a qualified education expense – like college tuition – then you are not subject to taxes on that hypothetical $100 of growth.

Qualified higher education expenses may include the following at an eligible educational institution:

• Tuition
• Certain housing and food expenses
• Books and supplies
• Computers and related technology – 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 (subject to a lifetime limit of $10,000 per individual when using a 529 plan)¹
• Up to $10,000 per year for tuition at K-12 public, private, or religious schools¹

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.

Want more details?

Check out our “What is the best option for college savings” video in our new College Savings Connection video series for more of a breakdown of Edvest 529’s tax benefits.

Don’t forget - by paying fewer taxes, Wisconsin taxpayers can grow their accounts faster, giving their child or grandchild an even bigger head start in paying for their higher education and career training.

To open an Edvest 529 account, visit Edvest.com/open.

About Edvest 529

For more than 25 years, Edvest 529 – Wisconsin’s direct-sold 529 college savings plan – has been helping families save for 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 has earned numerous accolades, including a Silver rating from Morningstar Investment Research and Management Firm for the second year in a row, a 5-Cap Rating by SavingForCollege.com,² and a 2023 Platinum MarCom Award for Website Redesign.³

Edvest 529 is a tax-advantaged investment, meaning contributions to an account may qualify for a 2023 Wisconsin state income tax deduction of up to $3,860 per beneficiary, per year, for WI taxpayers filing single or married couples filing a joint return. The plan has no sales charges, enrollment fees, or annual account maintenance fees. In fact, Edvest 529 is the fifth lowest-cost 529 college savings plan in the nation!⁴

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To learn more about Wisconsin's Edvest 529 College Savings Plan, its investment objectives, risks, charges, and expenses, see the Plan Description at Edvest.com. Read it carefully. Investments in the Plan are neither insured nor guaranteed and there is the risk of investment loss. Consult your legal or tax professional for tax advice. 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. 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. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributor and underwriter for Wisconsin's Edvest 529 College Savings Plan.

Footnotes

1. 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.↩
2. ²SAVING FOR COLLEGE’S 5-Cap Ratings provide an evaluation and comparison of 529 plans, utilizing a formula that examines dozens of factors grouped into the following categories: Performance, Costs, Features, Reliability, and Resident. The 5-Cap Ratings represent our Saving for College’s opinion of the attractiveness of each 529 plan relative to all other 529 plans, based on the many factors that they feel are important. The category scores and Resident Upgrades are used to compute the plan's overall 5-Cap Rating using an averaging algorithm. A plan's category scores are computed on a scale of 1 to 5, carried out to two decimal places, and displayed on the Plan Details page alongside the 5-Cap Rating. In addition, they assign a "Resident Upgrade" score to reflect additional benefits provided by the 529 plan to residents of the sponsoring state.↩
3. ³The 2023 international MarCom competition recognizes outstanding achievement by creative professionals involved in the concept, direction, design, and production of marketing and communication materials and programs. Winners are graded with points by the work’s quality, creativity, and resourcefulness and each entry is viewed and discussed individually. Entries receiving scores between 90-100 points are Platinum winners. There were over 6,500 entries from throughout the United States, Canada, and 47 other countries. ↩
4. ⁴ISS Market Intelligence 529 College Savings Fee Analysis 4Q 2023. Edvest 529’s average annual asset-based fees are 0.15% for all portfolios compared to 0.51% for all 529 plans.↩

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