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 ?
Among the changes in the tax overhaul passed by Congress in December was a provision allowing parents to use money saved in a 529 plan to pay for private school tuition for kindergarten through 12th grade.
Willis has been personally contributing to a 529 account for her son, Kyle, whom she called the "best lesson" for managing personal finances.
The House Ways and Means Committee's tax plan, released Thursday, expands the qualified expenses associated with a 529 college savings plan, which "may help to reduce parents' concerns" about limitations associated with the plans and make investing in a 529 plan "more palatable," according to Martha Kortiak Mert, chief growth officer for Savingforcollege.
For parents and grandparents who prefer a dedicated college fund, 529 plans--named after a section of the tax code--are increasingly appealing.
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com, a leading independent college savings resource and authority on 529 plans, administered the survey to over 2,400 website visitors, shedding light on the college savings behavior of parents and grandparents in the United States.
College saving, or 529, plans grew at a rate of 17% from the third quarter of 2012 to the third quarter of 2013.
YOU KNOW ABOUT THE POSSIBILITY OF YOUR 401(K) contributions being matched (typically by an employer), but did you know that your 529 savings plan contributions could be matched as well?
Most people know they can save for their children's college educations through a 529 plan, but what isn't so widely known is that 529s can be used to pay for adults to go back to school as well.
To help parents save now for their children's future college educations, state lawmakers in 49 states and the District of Columbia have authorized 529 plans (named after Section 529 of the Internal Revenue Code, which created them in 1996).