1 Million Dollars

Friday, November 28, 2014

Pay for living expenses with your 529

I just discovered something very exciting.  Did you know that you don't have to live on campus to use your 529 money toward living expenses?  Me either.  You can't claim more than the school says should be spent for living expenses and some vary that based on where you live, but my school does not.  They allow for $12,000 per year or $1000/month to be used towards living expenses.  Now, the only reason to use this is if you live in a state where there tax deduction for 529s or if the only other option is saving in a taxable account.  Always max out your Roth IRA before this.  Luckily I do live in such a state.  NY allows $5000 to be deducted from your taxes per person.  So a couple can deduct $10,000.

So, I am putting $833.33 every month into my 529 come January and pulling out $1000 every month until it is gone or I hit $12,000.  Since I did not know about this until now, I am putting $1000 in both November and December. Since at my top tax bracket in NY state I pay 5.25%, each $1000 will save me $52.50 in taxes.  How crazy is that.  So I'll save $105 this year and $525 in 2015.  Just for opening a 529 account and funneling money through.  The money sits the equivalent of money money market account so I won't make much but I won't risk the money I need. 

So check if your state allows you to do this.  If you are dependent, make sure they allow you to do this or give the information to your parents.  If so, see how much you save. 

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