Education Investing at Schwab

1. Qualified education expenses can include tuition, fees, books, supplies, equipment, and room and board. Certain costs associated with K-12 tuition, participation in a registered apprenticeship program, or payment of a qualified education loan up to $10,000 may also be considered qualified education expenses. The earnings portion of a nonqualified withdrawal is subject to federal and state income tax and a 10% penalty. State tax treatment of earnings may vary. Check with your tax advisor for rules on your state’s tax treatment. The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distribution, or other factors. Clients should consult a qualified tax advisor to discuss their individual situation. 

2. Same as above. 

3. Same as above.

4. For a child under the age of 19 considered a dependent at the end of year (or a full-time college student under the age of 24), the first $1,350 of a child's unearned income is tax-free. The next $1,350 is taxed at the child’s rate. Amounts over the $2,700 threshold will be taxed at the parent's tax rate. View Understanding the Kiddie Tax or IRS Form 8814  and IRS Form 8615 for instructions.

5. The contribution limit is reached when the entire value of all Kansas 529 plans for one beneficiary reaches $501,000 through a combination of contributions and account appreciation. The state treasurer may review and adjust the contribution limit as needed.

6. The contributor's adjusted gross income must be less than $95,000 ($190,000 per couple) to contribute $2,000. No contributions are allowed when the contributor's adjusted gross income is $110,000 ($220,000 per couple) or more.

7. A special gift-tax exclusion allows for contributions exempt from federal gift taxes of $95,000 ($190,000 per couple) per beneficiary in a single year. To qualify for the special gift-tax exclusion, you need to file a United States Gift-Tax Return form to treat the gift as if it were made in equal payments over five years. To avoid gift tax, you should make no additional gifts to the beneficiary during those five years. To qualify for gift-tax exclusion, contribution must be received by December 31. If you are a Kansas taxpayer and make a contribution between January 1 and the tax filing deadline, you are allowed to choose either the current tax year or previous tax year for the state income tax deduction.

8. Applies toward the annual gift-tax exclusion.

9. Generally, a child gains control of the account at age 18 or 21 (varies by state).

10. Parent-owned accounts are considered parental assets when calculating financial aid eligibility. Only 5.6% of parental assets and income are reflected in financial aid calculations. Financial impact depends upon the investor's financial situation.

11. Same as above.

12. 20% of the account value is considered to be the student's asset for financial aid calculations.

Before investing, carefully consider the plan's investment objectives, risks, charges, and expenses. This information and more about the plans can be found in the Schwab 529 Education Savings Plan Guide and Participation Agreement available from Charles Schwab & Co., Inc., and should be read carefully before investing.

The Schwab 529 Education Savings Plan is available through Charles Schwab & Co., Inc., and is managed by American Century Investment Management, Inc. The Plan was created by the Kansas State Legislature under the provisions of Section 529 of the Internal Revenue code and is administered by Kansas State Treasurer.

Notice: Accounts established under Schwab 529 Education Savings Plan and their earnings are neither insured nor guaranteed by the state of Kansas, the Kansas State Treasurer, American Century Investments or Charles Schwab & Co. Inc. Accounts established under Schwab 529 Education Savings Plan are domiciled at American Century Investments and not Schwab.

American Century Investment Services, Inc., Underwriter.

This information is for educational purposes only and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, Financial Planner, or Investment Manager.