529 College Savings Plan- NJ or NY? archived

I want to create 529 plans for my two youngish kids. NY's plan seems to have a better return but I'm wondering whether there's any benefit to using NJ's plan since I live here. Any thoughts/ experiences with either plan appreciated.

If I recall correctly the NJ plan sucks big time and was not recommended by our advisor. I can't recall which plan we went with but I do know it wasn't New Jersey.

The only advantage of NJ over NY is that your contributions are NJ Tax deductible if you also work in NJ. If you work in NY the NY plan contributions may be deductible (rules change by state). NY, regardless is still the best option.

We went with Vanguard out of AZ I think. Its transferable to any state.

i don't think the NJ plan gives you any tax deduction... so there is no tax benefit

I think the returns on the 529 s are all bad. For education try a Coverdale Ira. Invest in whatever stock you want. Reinvested dividends, if used for educational purposes, are tax free.

I agree. I took everything out of a 529 years ago and put it all in an account where I select and manage my own mutual funds. It has done really well and I completely control the $ and who it goes to and it has no actual connection to child it will be used for (no need for his name and SS# to be attached to it).

I have one based in NY and I work in NY, and you can deduct up to $5k a year on your taxes.

There are income and contribution limits on Coverdell plans.

The NJ 529 is awful, and you can't write contributions off your NJ tax return.

If you work in NY, get a NY 529. If you work in NJ, NY is still a good choice but also look into other states.

Same as annemarie here and pleased with it.

If I'm remembering right, the only benefit to the NJ plan is a one-time $1500 credit if your kid goes to a NJ state school. I think the lower fees/expense ratio of the NY plan (and others like AZ) more than trump that benefit though over time.

Lots of good advice above. You can compare nationwide here: http://www.savingforcollege.com/5_cap_ratings/

I opened in NY and have enjoyed the tax deduction in addition to Vanguard's low expense ratio. Where ever you go, investigate the option to buy direct rather than through an advisor. The savings can be dramatic when compounded over time.

Tell me more about the tax deductions. Years ago when I pulled kids money out, I saw no tax advantage which was one reason I pulled out. I should add kid I am saving for is not my kid, if that matters.

Rob, I don't believe there are income limits, a contribution limit yes. It's like a Roth for education. Not tax deductible but grows tax free as long as it's used for educational purposes. I belive the max is 2000 a year.
Just looked it up there are income limits too.

Last I checked, VA was best. American funds.

I can deduct my contributions to my ny plan on my ny taxes.

A straight deduction? As in I put $5000 in and I reduce my income by $5000?

Yes

10k for married couples filing in NY. I just checked at NYsaves.org, where our plan is.

Interesting. Does it have to be for my own child/dependent?

My question is this...it says it's for "NY tax payers". But if you work in NY but live in NJ, you aren't REALLY paying NY taxes. Your tax is taxed at NY rates, however, you get a credit for NJ and really are responsible for NJ taxes since that is your domiciled state.

Hmmmm...

I would suggest checking the site yourself, as I use an accountant and don't really claim to know it all.

mammabear said:

My question is this...it says it's for "NY tax payers". But if you work in NY but live in NJ, you aren't REALLY paying NY taxes. Your tax is taxed at NY rates, however, you get a credit for NJ and really are responsible for NJ taxes since that is your domiciled state.

Hmmmm...

It counts. If you work in NY you actually pay NY taxes. The withholdings from your paycheck go to NY state. You just get a credit in NJ for those taxes.

weirdbeard said:

mammabear said:

My question is this...it says it's for "NY tax payers". But if you work in NY but live in NJ, you aren't REALLY paying NY taxes. Your tax is taxed at NY rates, however, you get a credit for NJ and really are responsible for NJ taxes since that is your domiciled state.

Hmmmm...

It counts. If you work in NY you actually pay NY taxes. The withholdings from your paycheck go to NY state. You just get a credit in NJ for those taxes.

We are saying the same thing. But you get a credit for NJ, the taxes you actually owe. You don't owe NY, but your employer withholds at NY rates since you work there.

I thought you owed both but NJ gave you a credit for taxes paid to NY.

NJ is a gross income state, with a few credits for things like property taxes. NY is more like a federal tax form that allows deductibles for things like 529 plans, transportation costs, but it has a higher tax rate. So, if you work in NY you calculate your taxes based on income and deductibles first. Then, you take your NJ income, calculate the taxes and deduct the amount you have already paid through NY.

For us, the NY 529 plan is a better plan, we get an NY tax deduction, and it has no effect on the NJ taxes we owe.

If you work in NY and live in NJ you absolutely pay NYS taxes and depending on your circumstances, could end up owing in both NYS and NJ.

ours is in iowa and has had excellent returns (over the long haul, 10%). recently contemplated opening an additional nys acct., but the tax benefit was minimal, so didn't.

if you take a deduction on your NY portion of taxes... it reduces the deduction that you can take on your NJ taxes as income subject to tax by NY State and increases your income subject to NJ taxes, as I recall this increase makes it not worth taking the NY deduction.

Am I the only one who works in NYC but doesn't file NYS taxes?