Saving today can truly make college more affordable, especially if you take full advantage of the tax benefits offered by a 529 college savings plan like the University of Alaska's.

Simply put, any earnings are tax-deferred while you remain invested in your college savings plan. When you take funds out of the plan (called distributions) for qualified educational expenses, you don't have to pay federal taxes either. Please note that the availability of tax or other benefits may be conditioned on meeting certain requirements such as residency, purpose for or timing of distributions, or other factors as applicable.

While we, of course, welcome you to consider the University of Alaska, you can use your 529 college savings plan to fund an education at any eligible university, college, or technical/vocational school in the country. And, covered expenses include everything from tuition to room and board and books.

Your tax advantages can be significant: Any earnings in a 529 plan are not taxed while invested in the Plan, so all of the money you make in the plan stays in the plan, helping your savings grow even more.

Putting tax benefits to work for you.

What about gift taxes? While 529 contributions are considered completed gifts for federal tax purposes, the gift tax exclusions available for 529 contributions are generous. When you contribute to a 529 plan, you can invest up to $70,000 in one year ($140,000 for married couples) and average the one-time gift out over five years, so that gift taxes do not apply.

Those rules apply to grandparents and other relatives as well and can be especially advantageous if they wish to contribute a large amount at one time. However, grandparents, in particular, should keep in mind the generation-skipping transfer tax when considering gift tax consequences.

Important note. The rules regarding gift taxes, estate taxes, and the generation-skipping transfer tax can be very complex and are subject to change. We recommend that you ask a tax advisor and/or the IRS about your particular situation.