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While we are providing general information about the Florida savings plans, please consult the Plan Description and Participation Agreement for more detailed information and facts about the plan. Nothing within this article should be construed as investment advice.
A plan is a savings plan, with tax benefits, that encourages education savings for qualified education expenses — college, vocational, or other post-secondary learning. Unlike a traditional savings account or bank account, your money grows tax-deferred in a account and qualified distributions are federal tax and state tax free.
Different states have different state plans with different investment options and different benefits. Any plan can be linked to the Upromise rewards service. It is available to any state residents, not just Florida residents. Funds in this savings plan can be used to cover tuition and qualified higher education expenses at schools nationwide. The Florida Prepaid College Plan, however, is a college savings program available to only Florida residents.
Some people refer to it as a prepaid tuition plan. It attempts to limit the risk of increasing college costs. You must be a Florida resident to enroll in the Florida Prepaid Plan. These plan funds can only be used for tuition at in-state colleges and universities. If you know that your child will be going to school in-state, this could be a good option to lock current tuition prices against the future cost of tuition inflation. You can find more information about this option at the the Florida Prepaid College Board website at myfloridaprepaid.
Funds you invest in a plan grow tax-deferred. And funds that the student eventually withdraws from the plan towards qualified educational costs are free from federal taxes.
These federal tax benefits make the plan an extremely attractive option for most families. A common misconception is that these plan assets will disqualify your child from financial aid. If your child is an Einstein or football star, and manages to score a free ride to school, you can still repurpose those funds.
You would have to pay regular ordinary income taxes on earnings, but there would be no penalty. Alternatively, you can leave the funds in a plan to be used at a later date by this beneficiary or a direct relative of the original beneficiary. And for many, a plan can be used to transfer wealth. No, Florida does not offer tax deductions for plans. While contributions are not tax-deferred when they are put into the plan, there is tax benefit when they are withdrawn later on down the road by the student.
For questions about federal income tax benefits as they relate to your specific financial situation, consult a qualified tax professional. There is no time in which the funds within a Florida plan need to be withdrawn.
Unused funds can remain in the account and continue to grow tax-deferred. This is not limited to immediate family members; funds can be transferred to cousins, nieces, nephews, and other close relatives. Keep in mind that having leftover or unused funds in a Florida savings plan is uncommon. A plan can be used for tuition at eligible educational institutions and related educational expenses including: student fees, health fees, athletic fees, lab fees, books, and room and board.
Yes, a plan is an investment plan with different types of investment options. The investment options offer different levels of market risk. Speak with a qualified financial advisor about different investment portfolio options. Florida, like many other states, does not offer an FDIC insured college savings plan. Mutual funds, stocks, and bonds are similarly not FDIC insured. You can only have one named beneficiary on a Florida plan. The risk and mix of equities to fixed income of certain investment options is determined by the age of the beneficiary.
For this reason, you may want to have a different plan for each child. A plan can affect financial aid, but the impact is dependent on the account owner and their tax situation, not the beneficiary. If the account is held by the parent or guardian of the student, funds within are considered parental assets. Other scholarships may depend based on the school.
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Skip to content. What are some Florida tax benefits and advantages? Is a plan tax deductible in Florida? What happens to a Florida Plan if not used? Can a Florida Plan lose money? Do I need a Florida Plan for every child? You may be interested to know that multiple people can open accounts for the same beneficiary. Can a Florida plan be used to pay off student loans, apprenticeships, and K private schools? How do financial aid and scholarships affect a Florida plan?
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