Many parents believe that once their child enters college that it is too large to fund a college savings program. This is partially true. Even if you are paying college expenses out of pocket, you should still consider opening and funding a 529 plan.
The intent is not to accumulate a large balance for future college expenses, but to take advantage of the tax deduction offered by the various states. For example, Kansas allows a dollar-for-dollar deduction of up to $6,000 per child from your Kansas taxable income for contributions to a qualified 529-college program.
If the Kansas income tax rate is say 6%, then contributing $6,000 into the program would save you $360/year in Kansas state income taxes.
But what about market fluctuation, and the need to pay the tuition now and not in future years?
Simple, just deposit the funds into the money market option inside the 529 program, and a month later withdraw it to pay college expenses. You are able to use the funds for current college expenses, not be subject to any market risk and claim a deduction from your Kansas taxable income. Missouri residents have a similar state income deductions option, only it is limited to $8,000 per parent with a maximum deduction of $16,000 per couple.
