Update 11/18/21: Deal is back for 2021 – this time the offer for for $10 when you give $50. Hat tip to reader T
The Offer
- Virginia529 is offering a $5 bonus contribution for every $25 in gift cards you purchase ($50 bonus max)
The Fine Print
- Valid until December 3rd, 2019
- Cannot redeem the gift card and redeem it into your own account
- Virginia529 will make the reward contributions to the qualifying Virginia529 accounts on or about March 30, 2020
Our Verdict
We sometimes see these types of deals, but usually you can just deposit directly into your account. This is more complicated but you can max it out by purchasing $250 in gift cards (normally $500 deposit for $50 bonus). I never know if these deals/accounts are worth doing, so do your own research or consult a professional.
Hat tip to reader NIL
From April 18, 2022 through April 30, 2022, open a new Invest529℠ account and use the gift code SAVE25APRIL2022 to receive a bonus $25 contribution to your account. https://www.virginia529.com/offers/save25/
Just got my $10 gift card. Thanks D.O.C.
Mine also appeared today. Thank you!
I’ve never opened a 529 before, nor paid on student loans (always contributed enough to pretax that my AGI was low enough for $0 payment on PAYE). Probably I will have a payment at some point- I can use a 529 for student loans, yes? I would just withdraw it and then make the payment in the same year?
The 529 plan, at least through Virginia529, is not some sort of crazy investment crazy-growth vehicle. It is more of an 18 year long-haul investment vehicle. The funds you can choose are extremely limited and probably under-perform similar funds in the sector. My colleague was saying she had to dig really deep to find a fund in Virginia529 that was managed by Vanguard (i.e. low expense fees with good fund management). Yes, the funds you put in there will grow tax free when you withdraw it, but you probably could do better in the stock market with that money. The only real benefit for Virginia residents is the tax break – you can deduct $4,000/yr contribution against your state tax returns.
If your AGI reported to Virginia state is $100,000, your VA tax bill is $5,234. If you put away $4,000 into the 529, reducing your tax bill to $96,000, your new VA tax bill is $5,004, a savings of $230.
Since I started my plan for my daughter (Dec 2020), I’m up 7.5%. 2021 has been a good year. I’ll use this number as an example, and I’ll assume you take out all $4,300 on educational expenses in 2022, i.e. one year of Va529 investment.
Hypothetical $100,000 AGI
#1) $96000 + $4000 Va529 + $300 Tax Free gains – $5004 state tax = $95,296
vs
#2) $100000 – $5234 = $94,766
So #2 is $530 less than #1, but I haven’t figured in what gains you’ll have on the $4000 you choose to invest yourself. Of course, if you invest $4000 in the same exact fund as the Va529 and make 7.5% and withdraw it, it will be $300 less 20% capital gains tax, i.e. $240. And your difference becomes $290 ($230 income tax savings + $60 capital gains tax savings!).
However, lets say you took that $4000 and invested it in some stock that did better than 7.5%. 7.5% is great in its own right, don’t get me wrong, but some major, safe blue chip stocks are up way beyond that year-to-date:
Apple – 22%, Amazon – 16%, ExxonMobile – 33%.
At 20% gain on $4000, that is $800. $800 less 20% capital gains tax = $640, and at this point you are beating out the tax savings from line #1.
Doing the math, you’d need to do better than 16.6% return on your $4000 invested by yourself to beat the tax savings. If you think you can achieve that, then the Va529 plan doesnt really do you much good…especially if you are pulling it out regularly to make interest payments, reducing your possible gains. Of course, in a bear market, it is really hard to have any real stock gains, but at the same time, any Va529 investments will also be seeing some heavy losses.
YMMV. Does your state prohibit or penalize withdrawals for qualified expenses the same year contribution was made? (Michigan, Minnesota, Montana, Wisconsin.) Does your state ignore federally defined qualified expenses when assessing income tax or tax penalties? (Alabama, California, Colorado, Illinois, et al.) Or does your state not have a tax on personal income from interest, dividends, and capital gains? Can you make a principal-only payment with your withdrawal? Or will you need to forgo the student loan interest deduction? Are you keeping your total withdrawals for paying student loans to $10,000 or less? Participating in 529 Day (the week of May 29th) each year, redepositing $1,200 and rewithdrawing $1,500 adds up, be sure to keep track.
Tu Phat
According to the Virginia529 FAQ’s, there IS a contribution hold period: https://www.virginia529.com/blog/can-i-continue-to-save-in-a-529-plan-while-my-child-is-in-college/. It seems to be 5 days.
By the way, I spoke with Va529 on the phone, and BOTH the $50 gift card and $10 promo will count against the $4000/yr. So if you plan on contributing $4000, you only would need to contribute $3940 to max out the $4000.
I would contact Virginia529 to answer these questions. The wait time to talk to someone is very short. They will be able to answer all of your questions.
One thing to add in this. According to my CPA, the $4000 limit is per account, which is different if you change either the beneficiary or the owner or both. So if you have P1 and P2 and two kids, you can have 4 accounts or up to $16000 per year to deduct.
I live in Iowa, can I take this offer?
Thanks.
Yes, a resident of any state can take advantage of this. However, if Iowa let’s you deduct 529 contributions from your state income taxes, then you’re missing out on the tax break for $10.
I believe this is limited to Virginia, unless Invest529 is in Iowa which I can’t find or confirm on the internet. When I go to Iowa’s 529 page it seems to be a Vanguard page and I don’t see any kind of promos.
No need to make guesswork out of this, it’s in the FAQ and T&C that, “Invest529 has no state residency requirements”.
This year, unlike last, you are able to add the gift card to your own account.
Similar deal being offered for 2020, but not as generous: limit of $10 reward for $50 gift card purchase. DEADLINE IS NOVEMBER 16. Details: https://www.virginia529.com/blog/give-a-gift-get-a-reward/
“There is no limit to the number of gift cards an individual can purchase, however an account owner cannot receive more than the maximum reward amount of $10 for participating in the promotion.”
I’ve yet to receive $50 bonus as of April 1, 2020 and my investments are down $50 as of March 31, 2020 (but no surprise there).
As of 4/6 neither ex nor myself have received our $50. We gave to each other so it should have qualified.
I reached out to VA529 via the contact us form and they state that due to COVID payments are delayed but should post by 4/10.
I also reached out on 3/31 and was told the bonus would be deposited by this week. On Monday (4/6) I called them again and was also told that it would be deposited/post by the end of the week/today (4/10). So far… nothing for me… nothing for another account owner I know.
Mine was deposited into the account on 4/10 and became visible this afternoon (4/13) as uninvested cash. I checked with the other account owner and they saw the same in their account.
So it looks like it was just delayed. If you don’t see yours, it may be because Virginia529 said it was a manual process they had to do for each account to add the gift card bonus. But it appears you should see it any day now.
Thanks, posted yesterday here too.
Yep I got an email yesterday and checked both accounts and the $50 is there for me and ex-wife.
So Maine isn’t a huge state but their matching grants for 529 contributions are pretty great. Idk if it deserves a post but I just thought I’d share. It’s an easy few hundred up front and a few more each year, and you can open one for yourself if you think you might want to take a class at some point. Plus now a 529 can be used to pay student loans so it’s an even better deal for people with loans. Contribute, use up grant funds to take a class or two, then use the remainder (up to $10,000) on student loans. Again, pretty specific (Maine residents) but pretty neat.
https://www.nextgenforme.com/grants-for-maine-residents/
Note that it doesnt accept credit cards for purchase, you need to pay via routing/checking account number. For anyone with kids, if you can afford to buy a $250 card, you get $50 for free. That’s an instant 20% return on investment.
Worth noting: Gift card can’t be redeemed into your own account.
Also worth noting the card doesn’t have to be redeemed to get the bonus. So in theory if you are willing to float the $250 you could sit on the card until 3.30.20 when the bonus is supposed to post.
Why would you want to sit on the card after you’ve purchased?
I am not going to spell it out but it might be away to work around one of the limitations on the bonus if you only have one player. Read the terms….
Gotcha, I get it now. In 2 player mode myself and wasn’t thinking about 1 player mode.
If anyone would like to discuss exchanging cards, PM me via FT MS forum.
Update: connected with DoC/FT buddy, no further need.