FAQs

TAX IMPLICATIONS

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  • Earnings grow federal income tax free, and withdrawals for qualified higher education expenses are free from federal income taxes. Contributions are not tax deductible.

    Tax benefits are conditioned on meeting certain requirements. Federal income tax, a 10% federal tax penalty, and state income tax and penalties may apply to nonqualified withdrawals of earnings. Generation-skipping tax may apply to substantial transfers to a beneficiary at least two generations below the contributor. See the Investor Handbook for more information.

  • There are two major elements of the tax reform legislation signed into law on December 22, 2017 (H.R. 1) that impact 529 savings plans.

    • First, up to $10,000 per year may be withdrawn from 529 savings plans, federal income tax-free, if used for tuition expenses at private, public and religious K-12 schools. It is not currently clear what public K-12 school costs, if any, will be regarded as tuition for this purpose.
    • Second, the federal tax law now allows rollovers from a 529 savings plan account to an account in a 529A "ABLE" savings plan for the same beneficiary or a "member of the family" of the same beneficiary. The amount that may be rolled over cannot exceed, together with contributions from other sources to the applicable beneficiary's plan account, the annual limit on contributions to an ABLE account ($15,000 in 2018) without regard to the increased limit permitted for contributions by certain working beneficiaries.
  • Amounts held in a Coverdell ESA can be moved to a 529 plan account for the same beneficiary with no federal income tax consequences, thereby allowing education savers to consolidate their education savings.

  • The new tax law can be reviewed at www.congress.gov

ELIGIBLE EXPENSES AND TAX-TREATMENT OF QUALIFIED DISTRIBUTIONS

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  • The amendment to the federal tax code lists "expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school'' as qualified expenses and therefore federal income tax-free, subject to the $10,000 annual limit described above. Accordingly, to be eligible, a K-12 expense must be "tuition."

    However, the treatment of such distributions for state tax purposes depends on the tax law of the applicable state. Because state tax laws relating to distributions from 529 plans were enacted prior to the change in federal tax law permitting federally tax-free distributions for K-12 expenses, the state tax status of such distributions may be unclear in some states. Moreover, it remains to be seen if additional regulations or restrictions will be implemented in states that offer a state income tax deduction or credit for contributions to 529 savings plans. Contact a tax professional to understand the tax impact of distributions for K-12 expenses in your state.

EXPENSES OTHER THAN K-12 TUITION

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NJBEST SCHOLARSHIP

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  • No, the scholarship provided by the New Jersey Higher Education Student Assistance Authority to New Jersey residents participating in the NJBEST 529 College Savings Plan1 is only for attendance at an eligible New Jersey higher-educational institution and is not for elementary or secondary school attendance. The NJBEST Scholarship is subject to certain conditions and requirements. Please see the Investor Handbook for more complete information.

NEW JERSEY RESIDENCY

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    • Qualified withdrawals made by New Jersey residents are not subject to New Jersey state income tax. Taxpayers of other states may be subject to state income taxes on qualified withdrawals and should consider whether their state of residence offers plans with alternative tax advantages.
    • A college scholarship opportunity of up to $1,500 is available for students attending college in New Jersey.2
    • The annual $25 maintenance fee is waived.
    • There is limited impact on your qualification for other New Jersey financial aid.3

PLAN DETAILS

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  • You can open an NJBEST 529 College Savings Plan with as little as $25. The maximum aggregate plan balance per beneficiary is $305,000.3

  • Yes! The money on your NJBEST 529 account can be used at a wide range of schools. In fact, money in your 529 account can be used at most accredited two- and four-year colleges and universities and vocational schools, including many outside the U.S. In addition, up to $10,000 per year per beneficiary can be used for tuition for eligible public, private and religious primary and secondary educational institutions (K-12). At this time, it is not clear what, if any, expenses will be regarded as “tuition” in the case of public schools.3

  • Absolutely. You--not the beneficiary-- control how and when plan assets are spent for higher education expenses.3

  • Yes, you can change the beneficiary at any time. To avoid taxes, however, the new beneficiary must be a member of the previous beneficiary's family (including children, grandchildren, siblings, spouses, nieces and nephews, aunts and uncles, cousins and in-laws).3

  • Yes, you may reallocate the assets in your plan twice each calendar year or whenever you change the account beneficiary.3

  • You can select a new beneficiary but he or she must be a member of the previous beneficiary's family.3

  • NJBEST offers a college scholarship that rewards students who pursue higher education in New Jersey. The plan offers increasingly larger scholarships based on how long you save, up to a maximum $1,500 scholarship for over 12 years of saving.3

  • The program management fee is currently 0.10% annually. This fee is used to pay for the services of Franklin Templeton Distributors, Inc., and its affiliates and subcontractors under the Services Agreement, as well as the New Jersey Higher Education Student Assistance Authority for its services in connection with the program. The program management fee is subject to change. Investment management fees and expenses are also assessed by the mutual funds in which the plan portfolios generally invest. Please see the Investor Handbook for further discussion of the expenses associated with an NJBEST plan.

    Questions? Call us at 877-4-NJBEST or read the Investor Handbook for more information.3

  • Online, Telephone or by Mail

    To make an online withdrawal to the account owner:

    • Sign in to your NJBEST account
    • The proceeds may then be sent by check to the address on file or electronically to a bank account on file
    • Allow up to 10 calendar days for receipt of a check or 2-3 business days for receipt of an electronic funds transfer

    To make a withdrawal by phone to the account owner or the school directly (if on file):

    • Call us at 877-4-NJBEST

    To make a withdrawal by mail for proceeds to be sent directly to the college, a third party or a new checking/savings account:

    • Download and print the Withdrawal Request Form
    • Requests to send a check directly to the college, the beneficiary's address currently on file, or to the beneficiary's or your bank account may be returned via fax to (727) 299-8719
    • Requests to send proceeds by check, Federal Wire or electronically to a third party require that you obtain a signature guarantee stamp, as indicated in Section 4, and the completed form must be returned by mail to NJBEST 529 College Savings Plan, P.O. Box 33090, St. Petersburg, FL 33733-8090.

    To avoid processing delays, make sure you've filled out all sections of the form. And remember to factor mailing time into your planning.3

  • You or the student will receive IRS Form 1099-Q in the first quarter, if you made a withdrawal the previous year. Note: If you received the money, then you get the form. If the child or school received the money, the child will get the form.

    This form will show gross distributions, earnings, and principal. If any of the earnings are considered taxable, they should be reported on Form 1040 as part of a federal income tax return. Be sure to keep records of all qualified expenses.

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