Louisiana START Program
Have you heard about the Louisiana’s Student Tuition Assistance & Revenue Trust? The Louisiana’s Student Tuition Assistance & Revenue Trust is a state designated 529 Plan that gives account holders the opportunity to make tax deductible contributions into select investment accounts. These investment accounts come in two forms: Louisiana START Savings Program and the Louisiana START K12 Savings Program. The Louisiana START savings account lets family members set money aside to help their college kids pay for their tuition, room and board, and other required expenses. The Louisiana START K12 savings program allows parents to set money aside to pay for a K-12 school tuition. With the Louisiana START savings the state will perform Earning Enhancements, which is when the state matches a percentage of your annual deposits. For both programs, you do not have to include interest earned on your federal taxes. However for the START savings, you can exclude earnings from state taxes as well. For these savings accounts, you only need $10 to start, and that is the minimum amount that you need to deposit on your own schedule.
What is a Louisiana START Savings Program?
The Louisiana START Program is a college savings plan designed to help parents set money aside for their children’s college expenses. To open a Louisiana START Savings, you only need $10 to get it started. This savings account lets you save money at your own pace, and the State of Louisiana will perform Earning Enhancements, which is when the state contributes a percentage of the deposits made for the year. This Earning Enhancement is calculated based on the type of plan you opened, and your AGI. The state will match up to 14% of annual deposits. The percentage calculation can be found on the START savings website (https://www.startsaving.la.gov/startfaqs.aspx). A START Program is not just a savings for parents to contribute to; it can be grandparents, aunt, cousin, or anyone who wants to help the child pay for their college education. The type of account you open will be determined based on your relationship to the beneficiary.
With the Louisiana START Program you can spend the money on qualified education expenses of accredited colleges that are in or out of state. Those expenses include tuition, fees, books, supplies, equipment, room and board, and expenses for special needs. The beneficiary needs to be enrolled at half-time status to be able to use the funds for qualified expenses. For room and board, the expenses are caped out at the cost of attendance. So, for student living off campus, the room and board expenses cannot exceed the cost of attendance. If the student is living on campus the amount you can spend on room and board is the cost of attendance or the actual bill sent to the student, whichever is greater. The cost of attendance and estimated school expenses can be found at: http://nces.ed.gov/collegenavigator. You can search the school you plan to attend, and you will get an estimate on the cost of attendance.
The Louisiana START Savings Program has a Principal Protection Fund. This fund is managed by the Louisiana State Treasurer and invest 100% of deposits and interest in fixed earnings investments. These fixed earnings investments are corporate bonds, notes, and certificates of deposits (CDs). Louisiana guarantees a return on principal but does not guarantee a return on investment.
What is a Louisiana START K12 Savings Program?
The Louisiana START K12 Savings Program is an education savings account that is used to pay for kindergarten through twelfth grade tuition. To open a START K12 savings, you only need $10, and there is no limit on how often you need to deposit money. This money can be deposited through an auto draft, payroll deduction, or a direct payment, which also includes lump sums. No fees are charged to the owners of this account, only management fees are charged on the money invested in mutual funds. The funds in the K12 savings can only be spent on tuition at a Louisiana school that has kindergarten through twelfth grade. If your child is enrolled in an eligible school, but they do not charge tuition then the funds cannot be used. The max amount you can take out of this fund is $10,000 per year, and deposits are limited to a lifetime max of $180,000 (combined for all beneficiaries).
There are 5 accounts that you are unique to the owner, and you can choose from based on the type of account you want, which ranges from conservative to aggressive. The person opening the account will be able to select one or more investment funds, and age-based funds. If you already have a Louisiana START savings plan, those funds cannot be rolled over to the START K12 fund. However, if you have a START K12 fund, and your child graduates from high school, any funds left in the account can be put into a Louisiana START fund.
The beneficiary of this account needs to be enrolled or attending a Louisiana Elementary or Secondary School and the school must be listed on the LA Eligible School list. The START savings website provides a list of all the eligible schools in Louisiana and provides information on what schools are K-12 (https://www.startsaving.la.gov/aboutk12.aspx).
Tax Benefits
The Louisiana START & START K12 savings programs are qualified tuition programs, meaning that they are exempt from federal taxes. The tax benefits include your deposits being deductible from Louisiana State Taxable income. The max you can deduct is $2,400 per beneficiary or $4,800 for married filing jointly. Any unused portion can be carried forward as a deduction for the next year, and this carryover last up to ten years. Also, for the START savings, if the funds are used to pay for the qualified education expenses, the earnings on the savings account can be excluded from state and federal taxes. The START K12 savings is only exempt from federal taxes if the funds are used to pay for qualified tuition.
