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Posted by Alan on September 24, 2008, 7:19 pm
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Dick Adams wrote:
> My youngest child, Joshua the Mercenary, gets SSD funds
> and they get put away into a college fund. It never
> occurred to me to ask or look up, but are these funds
> tax free to him? Now and later?
>
> Dick
>
Social security benefits are taxable to a child in the same
manner they would be taxable to an adult. Half the benefit plus
his other income including tax-exempt interest would have to
exceed $25K before any amount of his SSD would be taxed.
You state that the benefits are going into a college fund but you
didn't say whether this "fund" is a tax deferral account (QTP
and/or CESA) or just an investment account that is going to be
used for his higher education. The QTP & CESA grow tax-free and
distributions are tax-free if used for higher education qualifed
expenses.
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