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COLLEGE SAVINGS IOWA DEDUCTION INCREASES FOR 2003

January 14, 2003

The maximum deductible contribution to Iowa's Section 529 program, College Savings Iowa, increases to $2,230 for 2003, according to the State Treasurer's office. The maximum deduction for 2002 is $2,180. This amount is deductible on Iowa returns only.

This maximum applies per donor, per donee. This means parents with two children can deduct $8,920 ($2,230 x 4) in 2003 College Savings Iowa donations; each parent can make a $2,230 gift to each child. Grandparents, wealthy aunts and uncles — in fact, anybody — can contribute to a child's fund.

Non-deductible contributions can be made in excess of $2,230 each year, as long as total account gifts do not exceed $239,000 per child. Earnings in Section 529 accounts such as College Savings Iowa are permanently tax-exempt to the extent funds are used to pay for college costs.

Section 529 contributions count against the $11,000 annual gift tax exclusion; a special rule enables taxpayers to apply up to five-years worth of annual exclusions for Section 529 plans. If you are interested in other Section 529 plans, you can compare available plans at www.savingforcollege.com.

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