#52 | Paying for College and Tax Effects on Divorce feat. Derrick Kinney & Sharon Ramage

Practical Tax with Steve Moskowitz

Financial expert Derrick Kinney discusses 529’s and how to prepare for a child’s education and Sharon Ramage joins us to discuss how you maneuver the taxable side of divorce. Episode Transcript Intro: Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm. Disclaimer: The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation. ------------------------- Episode Content --------------------------- Chip Franklin: Well, welcome to the Practical Tax Broadcast with tax attorney Steve Moskowitz. I'm Chip Franklin. We've talked about this in the past. If you had a kid that was five or six years old, would you jump in and start saving for college right then? Is that the best- Steve Moskowitz: No. I would save on the day he was born. When he or she were born, I would be making the first deposit. Chip Franklin: Yeah. Let's get into that too. In fact, let's start with our first guest. Derrick Kinny is a financial expert, author of Good Money. You've seen him on Fox News, Fox Business, Bloomberg, CNBC. Right down the line, everything. He's one of the top financial experts around the country. Nice enough to join us here with Steve Moskowitz, tax attorney Steve Moskowitz, on Practical Tax. Derrick, hello. Steve Moskowitz: Hi. Derrick Kinney: Hi, Chip. Hi, Steve. Great to see you both. Steve Moskowitz: Great to see you too. Thanks. Chip Franklin: So, you probably heard what Steve said. Would you agree that as soon as you start to think about having kids, you should start that savings? Derrick Kinney: I agree with him completely. Steve Moskowitz: Yeah. Actually, Chip, I agree with that. When you start thinking about it is when you start making the deposits. Don't even wait til the birth. Chip Franklin: Okay. Well, let's back up a little bit, and talk about the different ways to do it and the tax implications. The 529. If I understand that correctly, a lot of states, if not every state, has an option where you can ... Well, Steve, why don't you explain it to me so I don't mess it up? Steve Moskowitz: You were doing just fine, Chip. You never messed anything up. Basically, this is an incentive. The government gives all kinds of incentives for people to do things, because if you don't, eventually people look to the government and say, "You pay for it." So what you have here is an opportunity for people to put money away, and you can save some taxes. Not on the deductibility, but on the income tax you would've paid on the earnings. And then what they do is, in a recent change in tax law, they got more generous. Because it's not just for college anymore. It's kindergarten on up. So this is a way that parents, grandparents, interested people can set up an account for the child, and then you take advantage of the education. And education is so important to so many people, and this is something to help pay for it. Derrick, what do you think about that? Derrick Kinney: Yeah. I agree. It's interesting, because you want to think strategically. You mentioned the 529 now being able to use K through 12, and you can pull out to $10,000 per year. Whether it be private school, a charter school, it gives parents more options. But what I like about it is, is people work with someone like Steve, or they work with an estate attorney, et cetera. And they recognize that, "Look, I'm going to have an estate problem. These are ways people can use to help solve that problem and be the good person in their family." In the 529, they could give $16,