Good news for New Yorkers who want to save money for their children's, grandchildren's or even their own, higher education. It's called the New York State College Choice Tuition Savings Program.

Under this program, parents, grandparents, aunts, uncles or even students themselves can contribute cash to accounts that receive favorable tax treatment at both the state and federal level. The program is jointly implemented by the New York State comptroller and the Higher Education Services Corporation and will be managed by the Teachers Insurance and Annuity Association of America. Some details:

  • A Tuition Savings Account ("Account") may be opened for a designated beneficiary with a minimum $250 investment. However, if the Account owner opts to make periodic payments by payroll deduction or automatic deduction from a bank account, and Account can be opened with as little as $25. There's no fee to open an Account.
  • There's no limit to how much an Account owner can contribute annually to Accounts opened for designated beneficiaries. However, a maximum of $100,000 may be contributed by one or more Account owners for the benefit of a designated beneficiary.
  • Each year, the first $5,000 of contributions to the Account will be deductible by the Account owner for New York State income tax purposes. Spouses may each contribute $5,000 deductible dollars annually for the account of one or more beneficiaries.
  • Funds may be withdrawn from the Account with no penalty to fund the "qualified higher education expenses" of the designated beneficiary. "Qualified expenses" include such items as tuition, fees, books, etc.
  • An Account owner may make a withdrawal at any time and in any amount, but may be subject to tax penalties.
  • Provided that the funds are used as indicated above, none of the investment earnings will be taxed by New York State.
  • Federal income tax on the earnings is deferred until the money is used for the student's qualified expenses and then the earnings are taxable at the student's income tax rate.
  • An Account owner may replace the designated beneficiary with a substitute designated beneficiary who is a member of the family.
  • The funds are placed by the TIAA in a blend of equity, debt and money market investments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.