Educational Expenses

Using tax-advantaged educational investment plans, you can pay for your child’s educational expenses at a “discount” provided by tax savings.

Financial Abundance Guide describes in detail the benefits of the Coverdell Education Savings Account (ESA) and the Section 529 College Savings Plan. Both of these educational savings plans include:

  • Savings that continually grow on a tax-free basis
  • Tax-free withdrawals, when the funds are used to pay for qualified educational expenses.
  • An “educational discount” that equals the sum of your federal and state marginal income tax rates on all of the account’s earnings.
  • The ability to use tax savings to cut your educational costs by up to 40%.

We also explain the Hope Credit and the Lifetime Learning Credit. These can provide for up to a $2,000 annually in tax credits, which are a direct reduction of the actual taxes that you owe.