Thanks to an array of Pennsylvania and federal tax provisions enacted to help make college more affordable, you can enjoy the following benefits when you save through a nowU account:
- State tax deduction - Pennsylvania taxpayers can deduct contributions to a nowU account from their Pennsylvania taxable income up to $12,000 per Beneficiary per year. For married couples, contributions up to $24,000 per Beneficiary are deductible, provided each spouse has taxable income of $12,000.
- Tax-deferred growth -
Earnings are not subject to yearly taxation for either federal or Pennsylvania income taxes while they remain in the account.
- Tax-free withdrawals - When used for qualified expenses, the growth in your account is not subject to federal or Pennsylvania income taxes.*
- Estate planning benefits keep you in control - One of the unique features of a nowU account is that all contributions are removed from the estate of the contributor, but the Account Owner maintains control over them. This means that the contributor's estate will not pay estate taxes on the money held in the account, but the Account Owner retains control over how the money is used.
- Gift tax exclusion - Contributions qualify for the $12,000 annual gift tax exclusion, so a donor can make a large contribution to the account without incurring gift tax. In addition, a contributor can give up to $60,000 for a Beneficiary, and treat the contribution as if it were made over a five-year period for gift-tax purposes.**
- Funds in the account are exempt from Pennsylvania inheritance tax - Depending on the relationship between the deceased Account Owner and the heirs, this can be a savings of up to 15% of the entire value of the account.
Please consult your tax advisor for more detailed information.
Other Advantages for nowU Savers
There are a number of additional attractive features available to nowU savers that you can take advantage of:
- Better financial aid treatment - By law, a nowU account does not affect eligibility for financial aid provided by Pennsylvania, such as state grants. Savings held in other 529 plans do not receive this protection.
- Private college tuition discounts - By investing in a nowU account, Pennsylvanians can earn tuition discounts at over 200 schools (including more than three dozen in Pennsylvania) that participate in the SAGE Scholars Tuition Rewards program. More info
- Matching funds for low-income families - Lower-income Pennsylvania families may qualify for as much as a dollar-for-dollar government match of their savings placed in a Pennsylvania Guaranteed Savings Plan account through the Family Savings Account Program (FSA) administered by the Pennsylvania Department of Community and Economic Development. Call 717.787.1984 for more information.
- Protection from creditors - Assets held in nowU accounts are protected by Pennsylvania law from creditors of the Account Owner or Beneficiary.
