If you plan on sending your kids to college, you should be aware of the 529 college savings plan, which is a very good way to put way money for you child’s education. This savings plan investment that can be utilized by any college in the country.

Many parents are not sure whether or not the 529 is the best choice but there are calculators available to help you determine that. You can compare your potential income in your taxable account with what you might earn with a 529 college savings plan.

Weigh your options. Prior to starting using a savings plan estimator, there are some things you might remember. Many calculators Will only function with college savings plans. So what you should do is consider a prepaid tuition plan only if you know for a fact that the one receiving the benefits from the plan will be attending a 529 friendly school. the 529 guarentees tuition rates for the future and taking money from your plans are tax-free.

Withdrawals that are free of tax for those who qualify college expenses with the 529 are seen as gifts for taxes. This is applicable to annual contributions if they are no greater or equal to 12,000 for individuals, and 24,000 dollars for married couples making joint contributions. Also, you can make a lump payment equivalent to five years worth which comes to sixty thousand dollars for individuals or 120,000 dollars for married couples.

Beware that you will be required to prepare an alternative 529 plan for each of your offspring but keep in mind the limits would apply to the accounts individually.

Investement gains from your 529 is open to the lower capital gains rate, if it is held for more than twelve months. This also goes for qualifying dividends. However, short-term gains along with interest go for a regular rate.

How the tax savings calculator works

As a rule, most tax savings calculators will need the information that follows: the years left before the child goes to college the estimated rate surrounding college funds if you invested in a taxable account as opposed to a 529. No matter if you make a full payment or smaller payments and the number of years you plan to contribute and the average return expected.

The results will return the value at college age, estimated after-tax value at college age as well as what you’ll have and the gain from investing in a 529 college savings plan.

In the end estimates are just what they are – estimates so you will not know the exact amount until you begin investing. However, educating yourself before you decide on a plan will help you determine better what you should get.