A VT529 account helps St. Albans resident Kris Sabourin save on taxes and plan for the future

As a CPA, a football coach, and a new dad, Kristopher Sabourin is used to helping young Vermonters prepare for the future. He’s a partner at St. Albans accounting firm A.M. Peisch, a longtime football coach—for the St. Albans Steelers youth program, and now for the BFA St. Albans high school team—and on August 3, 2024, he and his wife, Kathryn Howrigan, welcomed their first child, Callahan.

In each of these roles, Sabourin has been a strong advocate for saving for education. In his 12 years with A.M. Peisch, he’s advised hundreds of Vermont families to take advantage of the benefits of the VT529 Plan, which is a tax-advantaged education savings plan to help families save for college or career training.  

Deposits made into a VT529 account by December 31 qualify for a 10% Vermont income tax credit, for contributions up to $2,500 per beneficiary per year (or up to $5,000 per beneficiary if filing jointly). A single tax filer could qualify for a state tax credit up to $250 per child, and a couple could claim up to $500 per child.  

“The opportunity to reduce taxes and to have the ability to invest tax-free for the future is a common talking point throughout the year with clients,” says Sabourin. “But I think the biggest appeal is that it provides them with an opportunity to contribute to the future success of someone they love. The tax credit is the icing on the cake.”

A jump on the future

Because all interest and gains that accumulate are tax-free in a 529 account, you give your loved ones a jumpstart when you create VT529 accounts for newborns and young children. Sabourin and his wife Kathryn will start a college savings account for their son shortly. “The sooner one can be put into place and funded, the better!”

While Sabourin says some parents hesitate to create education savings accounts for young children, since they don’t yet know if they’ll end up going to college, he points out that the use of funds extends beyond traditional college routes. “Eligible expenses are the same for universities, community colleges, and other qualified school programs like apprenticeships,” he says—and the list of qualified education-related expenses is surprisingly long.  

VSAC administers the VT529 program for the State of Vermont. VT529 funds can be used for qualified:

• tuition, fees and other related expense at two- or four-year colleges,*
• registered apprenticeships,*
• certifications,
• trade & vocational programs,
• tuition, fees and other related expenses for grad school and professional degree studies,*
• private K-12 schools,
• certain student loan payments,*
• student food and housing costs (either on- or off-campus) when enrolled in a degree program,*
• computers for use in a degree program*,
• books for use in a degree program*, and
• other educational equipment, such as tools for plumbing apprentices or scrubs for nursing students.*

Of these withdrawal uses, however, only the ones with an asterisk are permitted when the account owner has used the Vermont income tax credit. For more information on the tax credit, and qualified VT529 uses, see Title 32 of the Vermont Statutes Annotated.

Sabourin often encourages his football players to think outside the “traditional college route” when it comes to their future. “Some of the most successful people I know are plumbers, electricians, and carpenters,” he notes.

VT529 accounts receive more favorable treatment for financial aid

When the time comes for a student to apply for financial aid, funds in a VT529 account are treated more favorably than funds in other savings accounts. They are considered a parent asset, rather than a student asset. Federal financial aid formulas dedicate a fairly small portion of the parents’ assets toward the student’s college costs—a maximum of 5.64% per year. A student’s assets, in contrast, are typically assessed at a rate of 20% in the financial aid formula for higher education. Assets in a VT529 plan in which a parent or a student is the account owner are reported on the Free Application for Federal Student Aid (FAFSA) as an asset of the parent, and are thus assessed at the parent’s rate rather than at the student’s rate.

In addition, VT529 withdrawals are treated favorably. When funds are withdrawn by the parent account owner to pay for the beneficiary student’s qualified expenses for college or other training, the withdrawal is not counted as income for financial aid purposes.

Every dollar saved is a dollar not borrowed

Savings plans reduce the need for loans. Student loans often make up the bulk of college financial aid packages, and interest on the loans can significantly increase the long-term cost of paying for education. A VT529 plan, on the other hand, can grow as you contribute, so saving helps reduce the amount a parent or student beneficiary may need to borrow to help pay for college expenses

VT529: Easy to start, easy to fund, flexible to use

VT529 plans can be opened with just $25 (or even less through payroll deductions).  

VSAC’s Gift of College gift card is one easy way to give the gift of education opportunity. You can find VSAC Gift of College gift cards at Vermont locations of Cumberland Farms stores. Or, if the student already has a VT529 account, loved ones can contribute via the VT529 secure e-gifting option.

A VT529 account also allows you to choose from one of six investment strategies. Most families select the age-based plan, to match their children’s needs as they grow, but you can always change how the money is allocated as your investment goals change.

If the intended beneficiary decides not to pursue higher education or covers their expenses through scholarships, the unused funds can be transferred to a different beneficiary or (as of January 1, 2024) rolled over into a Roth IRA tax-free and penalty-free.  

For details and examples of the Vermont tax credit guidelines, see the Vermont Department of Taxes Technical Bulletin (TB-66). If you have specific questions about how the income tax advantages apply to your household, you may also want to chat with your tax preparer.  

For more on saving for (and gifting) education opportunities with VT529, plus details on the many benefits of the VT529 plan, visit our Saving for College page.

This holiday season, think outside the box

Thinking about the future can be fun as well as rewarding. Funding future educational opportunities, as well as other investments in setting up pathways to success, pay off.  

“Coaching young people provides a great opportunity to not only teach them about the game of football, but also about the working world and what opportunities are ahead of them,” notes Sabourin. “I like to discuss with them that, yes, playing high school sports is a very important and fun time of their lives, but it doesn’t define who they are. It’s a stepping-stone to build core values and work ethics that will propel you into the next phase of your life.”