You may be asking yourself whether there a good way to save for graduate school? You just moved to the Washington DC area and you have a good job that pays pretty well. But you are thinking of going back to school for a graduate degree (or another grad degree – this is DC of course)!
There is a tax-efficient way : You can open a 529 college savings account and name yourself as the beneficiary. As long as you use the funds for qualified education expenses like tuition, books, etc., you don’t pay federal or state taxes on any of the gain in the account. Moreover, you receive a state income tax deduction for the amount you contribute to the account. The maximum annual state tax deductions for contributions to 529 Plans are $4,000 in DC and Virginia and $2,500 in Maryland. And, if you decide later not to attend grad school or you obtain a full-ride scholarship, then you can change the beneficiary to a child or your niece/nephew. Below are the links for the three local 529 Plans:
- DC: http://www.dccollegesavings.com/
- Maryland: http://www.collegesavingsmd.org/
- Virginia: http://www.virginia529.com/
A good place to start your grad school savings fund is to make annual contributions of at least the minimum state deduction amount. You get a tax savings in the process. In addition, any growth in the savings will be tax-free upon withdrawal. So go ahead – invest in yourself by starting a 529 college savings account for yourself!