529 college savings plan

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529 College Savings Plan

An account into which persons deposit funds to save for university-related expenses. The funds in a 529 college savings account are tax-deferred and, if used directly to pay for college, tax exempt at the federal level. They are sometimes exempt at the state level as well. The plan exists in an attempt to make post-secondary education more affordable. See also: IRA, 401(k).

529 college savings plan.

Each 529 college savings plan is sponsored by a particular state or group of states, and while each plan is a little different, they share many basic elements.

When you invest in a 529 savings plan, any earnings in your account accumulate tax free, and you can make federally tax-free withdrawals to pay for qualified educational expenses, such as college tuition, room and board, and books at any accredited college, university, vocational, or technical program in the United States and a number of institutions overseas.

Some states also exempt earnings from state income tax, and may offer additional advantages to state residents, such as tax deductions for contributions.

You must name a beneficiary when you open a 529 savings plan account, but you may change beneficiaries if you wish, as long as the new beneficiary is a member of the same extended family as the original beneficiary.

In most cases, you may choose any state's plan, even if neither you nor your beneficiary live in that state. There are no income limits restricting who can contribute to a plan, and the lifetime contributions are more than $300,000 in some states.

You can make a one-time contribution of $60,000 without incurring potential gift tax, provided you don't make another contribution for five years. Or, you may prefer to add smaller amounts, up to the annual gift exclusion.

References in periodicals archive ?
For help in choosing a 529 plan, see "Rating 529 College Savings Plans.
The bill increases the amount of money Americans can save for retirement tax-free, promotes automatic enrollment in retirement savings plans and makes permanent the tax benefits of 529 college savings plans," Allison wrote.
So when Walker heard about 529 college savings plans (state-sponsored investment accounts) on the job, they sounded like a relatively easy, tax-free way to invest for her children's college education.
While CESAs are self-directed, 529 college savings plans work more like 401(k) plans in that you are offered only a small number of investment options.
The bipartisan bill proposes a new employer-matching program, allows 529 college savings plans to pay for computers for use in college, and provides greater flexibility to manage 529 investments.
This special day draws attention to 529 college savings plans and how these plans can help make the dream of going to college a reality.
PUTTING THE PIECES TOGETHER: (Above) A computer generated stag strolls through the New York Stock Exchange in Hartford's new commercial; (Below) a grocery store end-aisle display advertising a scholarship contest offered through Kraft products and featuring Hartford's logo; (Left) the "Playbook for Life," a personal guide to financial planning developed by Hartford and geared to college athletes; (Above Left) a DiGiorno pizza, one of the many Kraft products used to promote a college scholarship contest that offers 529 college savings plans administered by Hartford.
Renae: I had heard a lot about 529 college savings plans, but had been too busy to learn more about them.
Rewards can be directed to any beneficiary and may be invested in certain tax-advantaged 529 college savings plans (subject to meeting certain requirements), deposited in a high-yield savings account, used to pay down an eligible student loan or simply withdrawn for college or other expenses.
20, 2015 /PRNewswire-USNewswire/ -- The College Savings Foundation, a leading nonprofit helping American families save for college, calls for the White House to recall and Congress to oppose the proposal in the Administration's tax plan to roll back tax incentives for American families that have been available to them in 529 college savings plans since 2001.
But today, 529 college savings plans and separately managed accounts are making inroads on annuities in the market for tax-advantaged products funded with already taxed dollars, and they are dominated by major stock brokerages and mutual funds.
Although each state offers 529 college savings plans with low fees and tax incentives benefitting all income levels, half of those not currently using one say that they are not at all familiar with 529 plans.