What is a 529 account?

529 account

A 529 plan

Is a college savings plan sponsored by a state or state agency. The accumulated savings can be used for tuition, books, etc at most accredited two and four-year colleges and universities, vocational-technical schools nationwide and eligible foreign institutions.  U.S. residents of any state, who are 18 years old, or in some states the age of majority, may invest in most state’s plans.

Tax Advantages

The earnings grow tax-deferred.  Distributions for qualified higher education expenses are federal income tax-free.

Options

Different financial institutions offer different flavors of plans depending on your goals.  Some options include age-based portfolios, or an option to customize investments with a mix of equity, fixed income or money market investments.

Who Invests

Any U.S. resident 18 years or older with a SS# or Tax-ID can open a 529 account to save for a students future education expenses.  A 529 account can be opened in any state in the U.S.A.

Who Benefits

• There are no income restrictions for contributors.
• The beneficiary (student) can be changed to an eligible member of the original beneficiary’s family at any time.
• Children who will be future students, as well as adults can use 529 accounts to pay for their education expenses.
• The account owner (participant, parent, guardian) can take advantage of gift and estate tax benefits.
• Anyone can contribute up to $65,000 a year per beneficiary in a single year without incurring a federal gift tax.
• Once funds are transferred to the account, they are no longer in the participants estate, they belong to the beneficiary.
• The account owner (participant, parent, guardian) maintains ownership of the account until the money is withdrawn.

What can it be used for?

• Educational expenses such as Tuition, Books, Room & Board (food).
• Funds used for non-education expenses are allowed, but subject to Federal Income Tax and a 10% penalty tax.
• Distributions can be taken at any time.