529 plans make saving for college easier
A 529 College Savings Plan is a state-sponsored plan funded with contributions for the educational benefit of a child or an adult. Almost anyone can make contributions – parents, grandparents, friends, corporations, and tax-exempt organizations. The maximum total contribution varies by plan, but the limits are typically fairly high. You can make contributions to a 529 plans for as many beneficiaries as you like, and there are no age restrictions on beneficiaries.
The assets of a 529 college savings plan can be used at any accredited public or private colleges in any state.
Investment choices vary depending upon the plan.
All contributions are made after taxes, but the contributions do qualify for the annual gift tax exclusion. Also, earnings grow income-tax deferred, and withdrawals to pay for qualified educational expenses (see below) are tax-exempt. Depending on your state of residence, contributions may be state tax-exempt.
Withdrawals of earnings not used for educational purposes may be subject to a 10% penalty. Withdrawals of earnings will be included in the beneficiary’s taxable income.
Ownership and control
The account owner controls the account for the benefit of the beneficiary.
The owner can change the beneficiary to another family member.
There are no income limits to contribute to a 529 plan.
Qualified educational expenses
Covered expenses include:
- Reasonable room and board
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer’s official statement. The official statement should be read carefully before investing.
The information contained herein is general and should not be considered legal or tax advice. Laws of particular state and your particular situation may significantly affect the general information presented herein. The availability of the tax or other benefits mentioned above may be conditioned on meeting certain requirements. You should consult your attorney or tax advisor regarding your specific legal or tax situation.