As in years past, 529 providers have been busy with back-to-school ads, but this year, many of them are emphasizing why 529s are a better alternative to putting assets in a child’s name due to so-called “kiddie taxes” on capital gains, Reuters reports.
Under the new tax, which takes effect in January, the first $850 of a child’s earnings is tax-free and the next $850 is taxed at the child’s rate, which is usually 5% to 10%. Anything about $1,700 is taxed at the parent’s rate.
“As a result of the new law, it’s even less of a good idea to put money in a child’s name for college,” said Diana Scott, a senior vice president at
Andrea Feirstein, managing member of
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