You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.
You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.
+1. I was going to post this.
Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.
You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.
+1. I was going to post this.
Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.
This sounds pretty good and def something I'd take the time to do considering the fees would be considerably less. In looking at the NY plan in the bottom there's "*Up to $10,000 is deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. May be subject to recapture in certain circumstances such as rollovers to another state's 529 plan or nonqualified withdrawals." I don't see anything about Maryland recapturing tax deductions on their 529 website and I know Greenjb said they won't but I'm still skeptical. I'll have to do a little more digging... Do you completely rollover your MD 529 to the NY 529 or just leave a $1 in the MD529 plan so the account is still open and you can continue to make contributions?
There are fees for rolling over though, of $75:Looks like it is for if you are in the prepaid trust plan (you buy semesters), not if you are in the standard Investment Plan.
http://maryland529.com/Portals/0/Files/MPCT_Disclosure_Statement.pdf?ver=2015-11-30-163955-917
With one account the tax deduction is only worth a maximum of $143.75. So at best it'll save you $69 on taxes. And minus what you loose by investing at ER of 0.8 vs 0.16 in NY.. As an annual exercise I decided the hassle wasn't worth it. But maybe if I could dump in $10k and carry it forward I'd consider it.
My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true? It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.
I asked them if they wanted to make the check out to us, so we can claim the tax deduction.
My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true? It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.
I asked them if they wanted to make the check out to us, so we can claim the tax deduction.
The tax deduction is reserved for MD residents; are they MD residents? If not, then they can't claim the deduction. If they are residents, then they can claim the deduction since MD accepts contributions from third-parties.
Source- http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD (http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD)
My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true? It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.
I asked them if they wanted to make the check out to us, so we can claim the tax deduction.
The tax deduction is reserved for MD residents; are they MD residents? If not, then they can't claim the deduction. If they are residents, then they can claim the deduction since MD accepts contributions from third-parties.
Source- http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD (http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD)
If friends of family contribute directly to the College Investment Plan account I set up they can deduct what they've contributed to the account correct? In-laws said their tax accountant told them that friends and family combined contributions could only deduct a portion not to exceed $2,500 total per beneficiary... I said that didn't make any sense to me but I'd look into it. On T. Rowe's website it says "Maryland College Investment Plan - If you are the account holder or a contributor, you may deduct up to $2,500 of contributions each year from your Maryland State income per beneficiary", which isn't completely clear but I still think each individual who contributes to a 529 can deduct up to $2,500 per year, per beneficiary. Is that what others have assumed?
If you contribute to the Maryland College Investment Plan or the Maryland Broker-Dealer College Investment Plan, you are eligible for a subtraction from income. You may claim a Maryland-only subtraction of up to $2,500 per account holder per beneficiary. For more details see Administrative Release 32. https://www.freetaxusa.com/taxes2015/formdownload?form=md_ar32.pdf
What if a parent holds an account for a child, but the grandparents make the payments?
Only the account holder may take the subtraction
modification for the amounts the account holder
contributes. The grandparents may not take the
subtraction because they are not the account
holder. The parent also cannot take the subtraction
because the parent did not make the payment. The
account holder is the person that controls the
account and has the right to direct distribution payments or change beneficiary. The account
holder also has the right (subject to some
restrictions) to receive a refund or distribution from
an account.
Years | Year Contribution | Account Balance | T-Rowe Maintence Cost | T-Rowe Tax Benefit | T-Rowe Expense Ratio Cost | Year Cost For T-Rowe | Cumulate Cost T-Rowe |
1 | 5000 | 5000 | 10 | -89 | 40 | -39 | -39 |
2 | 0 | 5000 | 10 | -89 | 40 | -39 | -78 |
3 | 0 | 5000 | 10 | 0 | 40 | 50 | -28 |
4 | 0 | 5000 | 10 | 0 | 40 | 50 | 22 |
5 | 0 | 5000 | 10 | 0 | 40 | 50 | 72 |
6 | 0 | 5000 | 10 | 0 | 40 | 50 | 122 |
7 | 0 | 5000 | 10 | 0 | 40 | 50 | 172 |
8 | 0 | 5000 | 10 | 0 | 40 | 50 | 222 |
9 | 0 | 5000 | 10 | 0 | 40 | 50 | 272 |
10 | 0 | 5000 | 10 | 0 | 40 | 50 | 322 |
11 | 0 | 5000 | 10 | 0 | 40 | 50 | 372 |
12 | 0 | 5000 | 10 | 0 | 40 | 50 | 422 |
13 | 0 | 5000 | 10 | 0 | 40 | 50 | 472 |
14 | 0 | 5000 | 10 | 0 | 40 | 50 | 522 |
15 | 0 | 5000 | 10 | 0 | 40 | 50 | 572 |
Years | Year Contribution | Account Balance Year Cost For Vanguard | Cumulative Cost Vanguard | |
1 | 5000 | 5000 | 8.5 | 8.5 |
2 | 0 | 5000 | 8.5 | 17 |
3 | 0 | 5000 | 8.5 | 25.5 |
4 | 0 | 5000 | 8.5 | 34 |
5 | 0 | 5000 | 8.5 | 42.5 |
6 | 0 | 5000 | 8.5 | 51 |
7 | 0 | 5000 | 8.5 | 59.5 |
8 | 0 | 5000 | 8.5 | 68 |
9 | 0 | 5000 | 8.5 | 76.5 |
10 | 0 | 5000 | 8.5 | 85 |
11 | 0 | 5000 | 8.5 | 93.5 |
12 | 0 | 5000 | 8.5 | 102 |
13 | 0 | 5000 | 8.5 | 110.5 |
14 | 0 | 5000 | 8.5 | 119 |
15 | 0 | 5000 | 8.5 | 127.5 |
Years | Year Contribution | Account Balance | T-Rowe Maintence Cost | T-Rowe Tax Benefit | T-Rowe Expense Ratio Cost | Year Cost For T-Rowe | Cumulate Cost T-Rowe |
1 | 2500 | 2500 | 0 | -89 | 20 | -69 | -69 |
2 | 2500 | 5000 | 0 | -89 | 40 | -49 | -118 |
3 | 2500 | 7500 | 0 | -89 | 60 | -29 | -147 |
4 | 2500 | 10000 | 0 | -89 | 80 | -9 | -156 |
5 | 2500 | 12500 | 0 | -89 | 100 | 11 | -145 |
6 | 2500 | 15000 | 0 | -89 | 120 | 31 | -114 |
7 | 2500 | 17500 | 0 | -89 | 140 | 51 | -63 |
8 | 2500 | 20000 | 0 | -89 | 160 | 71 | 8 |
9 | 2500 | 22500 | 0 | -89 | 180 | 91 | 99 |
10 | 2500 | 25000 | 0 | -89 | 200 | 111 | 210 |
11 | 2500 | 27500 | 0 | -89 | 220 | 131 | 341 |
12 | 2500 | 30000 | 0 | -89 | 240 | 151 | 492 |
13 | 2500 | 32500 | 0 | -89 | 260 | 171 | 663 |
14 | 2500 | 35000 | 0 | -89 | 280 | 191 | 854 |
15 | 2500 | 37500 | 0 | -89 | 300 | 211 | 1065 |
Years | Year Contribution | Account Balance | Year Cost For Vanguard | Cumulative Cost Vanguard |
1 | 2500 | 2500 | 4.25 | 4.25 |
2 | 2500 | 5000 | 8.5 | 12.75 |
3 | 2500 | 7500 | 12.75 | 25.5 |
4 | 2500 | 10000 | 17 | 42.5 |
5 | 2500 | 12500 | 21.25 | 63.75 |
6 | 2500 | 15000 | 25.5 | 89.25 |
7 | 2500 | 17500 | 29.75 | 119 |
8 | 2500 | 20000 | 34 | 153 |
9 | 2500 | 22500 | 38.25 | 191.25 |
10 | 2500 | 25000 | 42.5 | 233.75 |
11 | 2500 | 27500 | 46.75 | 280.5 |
12 | 2500 | 30000 | 51 | 331.5 |
13 | 2500 | 32500 | 55.25 | 386.75 |
14 | 2500 | 35000 | 59.5 | 446.25 |
15 | 2500 | 37500 | 63.75 | 510 |
What I really came to post about on this thread though was an analysis off fees of Maryland's offering to get the state tax deduction (T-Rowe Price) vs Vanguard without the tax deduction. I started to do some math and thought it was a ripoff. It sounds like some other people have come to the same conclusion. Anyways here's some numbers. Please poke holes in them if you can. I'm trying to help out my brother in law who resides in Maryland as he wants to setup funds for his nephew and niece.
You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.
+1. I was going to post this.
Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.
You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.
+1. I was going to post this.
Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.
I totally agree -- it's unethical for the state of Maryland to make a big show of "helping" people save for their kids' college education and then turn around at let T.Rowe rip them off with unconscionable fund fees. But my hacked-together solution really does work well if you're willing to put in about an hour of work every year. My wife and I just contributed $2500 to each of our kids' Maryland 529 accounts (thus ensuring the maximum $575 state tax deduction); then I opened New York state Vanguard funds for both my kids and rolled over all but $500 from the Maryland funds to the New York funds -- no fees at all, whole thing went off without a hitch, and the Vanguard 529 team could not be more helpful or professional. I left $500 in each Maryland account just to keep them open and active and serve as pass-through accounts so I can nab that tax deduction every year while letting the money grow in low-fee Vanguard funds. It's really simple to set up, and I recommend it to anyone.
Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.
I totally agree -- it's unethical for the state of Maryland to make a big show of "helping" people save for their kids' college education and then turn around at let T.Rowe rip them off with unconscionable fund fees. But my hacked-together solution really does work well if you're willing to put in about an hour of work every year. My wife and I just contributed $2500 to each of our kids' Maryland 529 accounts (thus ensuring the maximum $575 state tax deduction); then I opened New York state Vanguard funds for both my kids and rolled over all but $500 from the Maryland funds to the New York funds -- no fees at all, whole thing went off without a hitch, and the Vanguard 529 team could not be more helpful or professional. I left $500 in each Maryland account just to keep them open and active and serve as pass-through accounts so I can nab that tax deduction every year while letting the money grow in low-fee Vanguard funds. It's really simple to set up, and I recommend it to anyone.Interesting, because the MD documents I've looked at I swore it said a roll-over fee of $50-75 or so. Makes this more interesting of that's not the case