Three Options for Excess 529 Plan Funds

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The #1 question I hear from parents wondering about opening a 529 Plan to save for their child’s education is: what happens to unused money in the plan.

Don’t worry. A 529 Plan is not a use-it-or-lose-it account. There are several ways you can use those funds. Some with greater tax benefits than others.

Today you can find me at Forbes sharing three options for excess cash in a 529 Plan.

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Hobby or Business?

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The IRS’s Hobby Loss Rules puzzle many people, especially those rocking the side gig. A general rule of thumb is that if your business is profitable for two out of the last five years, it’s a business. But that isn’t the whole story.

Today you can find me on the FreshBooks blog, sharing tips for keeping your side hustle out of the dreaded Hobby Loss zone.

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Are Summer Camp Expenses Tax Deductible?

RSP6NAGL6BThe school year is ending and parents across the country are getting ready for the annual tradition of sending the kids to summer camp. It’s a pricey proposition. According to Care.com, the average cost of sending the kids to camp runs from about $304 a week for day camps to over $2,000 per week for sleepaway camps. Fortunately, under certain circumstances, you may be able to take advantage of tax deductions and credits to help offset the cost.

One of the most valuable deductions for camp costs could be the Child and Dependent Care Credit. Sleepaway camps don’t qualify for the credit, but day camps do, as long as the parents send their kids to day camp in order to work or look for work.

The total expenses that you may use to calculate the credit are limited to $3,000 for one child, or $6,000 for two or more children. Since that limit includes total daycare expenses for the year, if you’re already paying for daycare or before- or after-school care for your child, you may have already reached those maximums before summer started.

The Child and Dependent Care Credit is claimed by completing Form 2441 with your individual tax return. In order to claim the credit, you’ll need to provide the camp’s name and Employer Identification Number (EIN) as well as total expenses paid per dependent.

 Eligible day camps can run the gamut from sports camps to science camps, but tuition paid for summer school is not eligible.

Some parents grew up going to sleepaway camp and want the same for their kids, despite the hefty price tag. In that case, tax benefits may be more elusive. If the camp requires vaccinations, physicals or other medical expenses, those costs are deductible as itemized medical expenses on Schedule A, but parents under the age of 65 will need to have total out-of-pocket medical expenses exceeding 10% of their Adjusted Gross Income in order to realize any tax savings.Eligible day camps can run the gamut from sports camps to science camps, but tuition paid for summer school is not eligible.

This post originally appeared on Forbes.

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