Tax Savings
Is there a such thing as a tax exempt savings account?
I want to open a savings account for my extended family. This account will be a scholarship fund for graduating high school students who have been accepted into a higher education institution. I have read regarding the 501c(3) and that lots of paperwork and $500 to set up. I simply want an account for my family members to contribute and twice a year the treasurer can issue checks to the institutions on behalf of family members that have applied for the family scholarship. It is ideal to not have to pay taxes on the interest of this account.
You should look into 529 savings plans. These are educational savings accounts that allow your contributions to grow tax exempt or deferred. You may need to set up a 529 per beneficiary - you'll have to check into the restrictions.
If you decide this is the right sort of plan for you, read up on different states' offerings, as they differ in returns and fees. You can have your account in any state, no matter which state you live in, though there may be tax advantages to having one in your own state.
Check http://www.savingforcollege.com for lots of information on 529s.
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