iShares 529 Plan tax advantages

It's never too early to begin laying the foundation for future success through education. Remarkably, in the past decade, college expenses have risen nearly 50%.1 Consistent investing, sound financial advice and a 529 plan are the building blocks of a winning college strategy.

Smart tax solutions for investors

When you decide to invest in something as important as education, you don't want anything holding you back from achieving your goals - particularly taxes.

  • Tax-deferred growth - Pay no taxes on account earnings while the assets remain invested in the iShares 529 Plan account.
  • Tax-free withdrawals - Withdrawals are tax-free when used for qualified higher education expenses at eligible educational institutions.

Special tax advantages for Arkansas residents

Arkansas taxpayers can deduct from their Arkansas taxable income their contributions to an iShares 529 Plan account of up to $5,000 per beneficiary per year ($10,000 for married couples). Earnings on withdrawals used to pay for qualified education expenses are not subject to Arkansas state income tax.2

Smart gifting & estate tax advantages

Parents or grandparents gifting to family members may receive an immediate benefit in reducing their gross estate, as donor. In addition, the iShares 529 Plan's high contribution limits (up to $366,000 per beneficiary3) provide a convenient way to effectively lower the value of your taxable estate.

  • Donors may contribute up to $14,000 per beneficiary each year (up to $28,000 for married couples, filing jointly) without gift-tax consequences.
  • Donors may choose a special election that allows them to make a contribution of up to $70,000 per beneficiary ($140,000 if married, filing jointly) gift-tax free as long as there are no further gifts in the same five-year period covered by the election.4
  • If the donor is also the account owner, they retain control over assets in the iShares 529 Plan account - even after removing the assets from their estate.

Tax-free earnings can be used to fund expenses at most schools

Account savings can be used at nearly every two- and four-year college, university, graduate school or vocational school - including many schools abroad - to pay for qualified higher education expenses.

More appealing than an UGMA/UTMA for education

Many families set aside college savings in UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Act) accounts. Investments in UGMA/UTMA accounts belong to the child who will retain control of the account upon reaching the age of majority. In addition, UGMA/UTMA accounts are taxable accounts, and do not benefit from a tax-deferred or tax-free status. In addition, UGMA/UTMA accounts will be considered assets of the student, not the parent, which may impact the student's access to financial aid.

Comparing college savings options

There are currently three main options for tax-deferred college savings. See how the iShares 529 Plan compares to other savings options, feature by feature.

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