Look to their future with VT529 education savings … and get a 2023 Vermont tax credit

What can you give this season that lasts and has meaning, long after it’s unwrapped? If you still need to buy gifts for the children in your life, here’s an idea. You can contribute to a VT529 education savings account. Vermonters also get a 10% tax credit for VT529 contributions.

Here’s a secret: Parents love it, too, when you contribute to their kids’ VT529 savings.

The College Savings Foundation notes that 45% of parents would ask for gifts to their children’s 529 account to celebrate the holidays.

It’s a perfect gift: You can fund education opportunities AND get a credit on your Vermont tax return. Just be sure the funds are deposited by December 31. 

What's a 529 education savings plan?

A 529 education savings plan is designed to help families save for higher education costs for college or career training. And for an extra bonus, there are tax benefits to make saving easier. The plans are called “529s” because they’re named after Section 529 of the Internal Revenue Code.

There are many education savings investment plans out there. But only the VT529 plan, administered by VSAC for the State of Vermont, offers an income tax credit to Vermont taxpayers.

Why does contributing to a VT529 account last longer than other gifts?

Contributing to a 529 education savings account is the gift that keeps on giving.

• Your initial investment can grow over time, especially when you don't plan to make a withdrawal for many years. That’s one of many reasons why a 529 account makes a great gift for newborns and young children. But it's never too late to open a 529 account.
• Tapping a 529 for education for training has no age limit! From teens to adults who want to re-skill, 529 funds are available for them.
• All earnings in 529 accounts grow tax-free. When the money is withdrawn to cover qualified educational expenses, the interest earned is not taxed. That means you won’t pay any state or federal taxes on the earnings.
• You can take a 10% Vermont income tax credit each year on funds that you deposit in a VT529 account. (The maximum tax credit is $500/account, per year.)
• Students with education savings are three times more likely to pursue education after high school. They’re also four times more likely to complete that training. It’s hard to know what path a very young student may choose as they grow. But, you’ll know that your gift will help them earn the degree or credentials they need for their dream job.

Every dollar invested into 529 education savings plans can help the children in your life get ready for tomorrow’s opportunities.

How do I open a VT529 account, and invest the money?

VSAC’s VT529 college savings plan has a number of advantages that makes investing easy.

• Since 529 plans can be opened with just $25 (or less with payroll deductions), they're accessible for families at most income levels.
• You can choose from six investment portfolios. Most families select the age-based plan, to match their children’s needs as they grow.
• A 529 account is flexible, too: When you fund a VT529 account, you can change your investment strategy.
• You can always change how the money is allocated as your investment goals change. 

What if the 529 education savings funds go unused?

You may be wondering, what if the child does not continue education or training after high school? What if the child gets enough grants or scholarships to fund their own education?

Sometimes it’s hard to see a clear future and you want to be sure that your money will matter. There’s good news! If the intended beneficiary decides not to use their savings, the funds can be transferred to a different beneficiary.

What can VT529 savings be used for?

Okay, so it’s time to pay those college or training bills. The great thing is, the list of qualified education-related includes a lot more than just four-year college tuition. VT529 funds are flexible to use for:

• two-year college,
• apprenticeships,
• certifications,
• trade & vocational programs,
• grad school, and
• more.

529 accounts can also be used to pay for:

• student food and housing costs—either on- or off-campus,
• computers,
• books, and
• other educational equipment.

Families can even use 529 education savings to make student loan payments. Private K-12 school tuition can also be paid for using 529 funds (although contributions made to a VT529 that are used for this purpose do not qualify for a Vermont tax credit).

I don’t have time to set up a VT529 account. Is there another way to contribute?

Everyone loves a gift card, and as you may have guessed, you can buy at VT529 gift card.

VSAC’s Gift of College gift card is one easy way to give (or ask for) the gift of education opportunity. You can find VSAC’s Gift of College gift cards at Vermont locations of Cumberland Farms stores, making it convenient to pick up a local card for the loved ones on your holiday lists. Learn more about purchasing or redeeming a VSAC Gift of College card.

Already have a VT529 account? Invite parents, grandparents, family members, and friends to contribute to an existing VT529 account with a gift of any amount using the VT529 secure e-gifting option.

I like the idea, but I want to give a gift that this kid will love, right away.

Watching kids open gifts can be one of the most fulfilling feelings in the world. And as they turn to you with thanks and excitement, their joy is your joy. Giving a toy, or clothes, or experiences, can seem so much more fun than an investment in their future. But is it as important?

Depending on your traditions, maybe there are ways that you could do both. Here are some ideas to give the gift of college savings and make it exciting at the same time.

• Wrap art supplies and help them create a “dream board” of what they want to do when they grow up. Talk to them about how your VT529 investment will help them get there.
• Put a VT529 gift card in the pouch or outfit of a stuffed animal (let the child’s family know to get it out, of course).
• Cook a celebratory dinner or dine out in their honor and talk about the career they want to have.
• Create a themed box of toys representing the career or training that they’re looking forward to. Try notepads and markers for a teacher, a stethoscope for a doctor or nurse, or toy tools for a plumber.
• Buy books that profile stories of people and their paths. 

Funding a VT529 account is a great gift. How do I get the Vermont tax credit?

VT529 is the only educational savings program that offers a Vermont state income tax credit. Deposits made into a VT529 account by December 31 qualify for a 10% tax credit.

The 10% tax credit is capped at $2500 in contributions, or $250 per beneficiary per year. If you’re filing jointly, the tax credit is up to $500 per beneficiary. Here are some examples:

• A single tax filer funding a 529 account for one child could claim a state tax credit up to $250 per beneficiary.
• A couple could claim up to $500 per beneficiary.
• For a family with two children, the single filer could claim up to $500, and the couple, $1,000.
• Rollovers from another state’s 529 plan into VT529 are also possible. A rollover is eligible for the tax credit on the contributions portion of the rollover.
  • Note: The funds must remain in the VT529 plan for the remainder of the tax year. When the tax year ends, you may claim the tax credit. 

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:

 VSAC's Saving for College

Happy Holidays!