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 $2,500 of a child's unearned income is tax-free. Amounts over the $2,500 threshold will be taxed at the parent's tax rate. View Understanding the Kiddie Tax, or IRS Publication 929 for more detail.

5. The contribution limit is reached when the entire value of all Kansas 529 plans for one beneficiary reaches $455,000 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. To qualify for the special lump-sum gift-tax exclusion, you need to file a gift-tax return 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.

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 Plan 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. If you are not a Kansas taxpayer, consider before investing whether your or the beneficiary's home state offers a 529 plan that provides its taxpayers with state tax and other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available in such state’s qualified tuition program. Tax and financial aid treatment of 529 plans is subject to change. As with any investment, it is possible to lose money by investing in this plan.

 

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 the Kansas State Treasurer. Notice: Accounts established under the 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 the Schwab 529 Education Savings Plan are domiciled at American Century Investments and not Schwab.

American Century Investments receives remuneration from fund companies, including American Beacon Advisors, Metropolitan West Management, LLC, and JP Morgan Funds for recordkeeping, shareholder services, and other administrative services associated with funds held in the Schwab 529 Education Savings Plan portfolios.

Schwab and the Plan’s Program Manager, American Century Investment Management, Inc., have designed the investment strategy and investment options to require or favor the selection of Schwab-affiliated funds, American Century funds, and certain third party mutual funds that have a business relationship with Schwab or American Century. Accordingly, there is a conflict of interest in the selection of the funds for the portfolios because Schwab, a Schwab affiliate, or American Century, respectively, earn more revenue as a result. The selection of specific mutual funds for the portfolios is subject to the oversight and approval of the Program Administrator. For more information on the financial arrangements between Schwab and the Program Manager, and between the Program Manager and the underlying funds, please see the “Fees and Expenses” section within the “Schwab 529 Education Savings Plan Guide and Participation Agreement.”

Information provided is for general purposes only and is not intended to be a substitute for specific individualized tax or legal advice. Where specific advice is necessary or appropriate, please consult a qualified tax or legal advisor.

American Century Investment Services, Inc., Distributor.