Arkansas rewards families who save for a child's college education.
A 529 plan functions as a tax-advantaged college savings vehicle. Generally, contributions count as tax-deferred, accounts grow tax-deferred, and withdrawals remain tax-free, if used to pay for qualifying educational expenses. Each state sponsors its own version of the 529 plan, and some provide tax benefits as well.
The Facts
Arkansas sponsors two Section 529 plans -- the GIFT College Investment Plan and the iShares Investment Plan -- that allow families to contribute up to $366,000. In addition to federal tax benefits, Arkansas allows taxpayers to deduct up to $5,000 per year from state income taxes for 529 plan contributions.
GIFT College Investment Plan
This plan, administered by the Vanguard Group, allows contributions as low as $5 per month on payroll deduction, or $10 per month for recurring plans. You can select an age-based portfolio that grows more conservatively as your child nears college age, or create your own portfolio from Vanguard's investment options.
Matching Grant Program
Arkansas residents with a GIFT College Investment Program account may apply for a matching grant. Taxpayers with household incomes below $30,000 can qualify for $2 in matching funds for every $1 they contribute. Taxpayers earning between $30,000 and $60,000 can qualify for a dollar-for-dollar matching contribution.
iShares
The iShares 529 Plan uses iShares exchange traded funds as the investment vehicle, calling for a minimum initial investment of $500 and subsequent contributions of $50. You can do payroll deduction of $25 per pay period, however.
Tags: College Investment, GIFT College, GIFT College Investment, Investment Plan, College Investment Plan