What is Louisiana's START Savings Program?

The State of Louisiana offers a college savings plan, called the START Savings Program which is a “Qualified Tuition Plan” under Section 529 of the Internal Revenue Code (IRS).  While 529 accounts are often used to pay for children’s college tuition, those funds can also be used for a variety of qualified expenses. In fact, recent changes to federal law under the Tax Cuts and Jobs Act of 2017 have given investors additional options for how they can spend their 529 plan dollars.

Earnings in 529 plans aren’t taxed under the federal tax code, withdrawals for eligible expenses are tax-free, 529 contributions can be deducted from state income taxes and Louisiana's START Program offers an additional earnings enhancement based on the account owner's reported federal adjusted gross income (AGI).

Here are 7 frequently asked questions:

1.  Do I have to be a parent or grandparent to open an account?

No. There are six (6) different account categories based on the relationship of the account owner to the beneficiary.  The account may be opened by any person or legal entity. Legal entities include groups, trusts, estates, associations, organizations, partnerships, and corporations that are incorporated, organized, established, or authorized to conduct business in accordance with the laws of one or more states or territories of the United States. Whoever opens the account, owns the account.

2.  Who can be a beneficiary?

A account may be opened for any person with a social security number of any age, from newborn through any age. Once the beneficiary enrolls into the post secondary institution of choice, the account funds may be disbursed to the beneficiary, to the account owner, or to the school as directed by the account owner to pay eligible higher education expenses.

3. What are the tax advantages to opening a account?

Earnings on START accounts are tax deferred until withdrawn. If the funds are used to pay Qualified Higher Education Expenses, the earnings are exempt from both state and federal taxes. Deposits to START accounts are deductible from reported Louisiana income, up to $2,400 per year, per beneficiary. Unused portions may be carried forward to subsequent tax years. Married couples filing jointly may deduct deposits to START accounts from Louisiana State Taxable Income up to a maximum of $4,800 per year, per beneficiary, and any unused portion may be carried forward to subsequent tax years.

4.  How is the money in the account invested?

Ten investment funds are offered to meet the unique circumstances of each account owner. These funds range from very conservative to very aggressive.  Account Owners may allocate deposits to the following START Saving Program investment funds that offer Fixed Earnings, Variable Earnings, and/or Age-Based Funds.

5.  What happens if I move?

Once an account owner and/or beneficiary establish Louisiana residency and the START account is opened, continued Louisiana residency is not required to participate in the START Saving Program with all benefits including Earnings Enhancements. You can roll over your START account to another 529 plan but all Earning Enhancements and interest thereon will be forfeited.

6. Where can the START funds be used?

The beneficiary can use START funds at any eligible educational institution including:  any state college or university or a technical college or institute or an independent college or university located in or outside Louisiana.

7.  How will the START funds affect my child's opportunity to qualify for financial aid?

The impact of a START account on financial aid will depend upon the circumstances of the beneficiary’s family at the time the beneficiary enrolls in school, as well as on the policies of the governmental agencies, school, or private organizations to which the beneficiary (and/or the beneficiary’s family) applies for financial assistance. Since saving for college will increase the financial resources available to the beneficiary, it could potentially have some effect on the beneficiary’s eligibility. The value of a START Saving Account has no impact on eligibility for a Taylor Opportunity Program for Students (TOPS) award.

To learn more and schedule a meeting, visit us at royalroadwealth.com or contact us at info@royalroadwealth.com.