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 ?
Congress modified the tax code to expand 529 college savings plans to allow families to get tax breaks if they set aside money to pay for K-12 private school tuition.
By creating incentives for parents to invest in tax-free 529 college savings plans, like an employer-matching program and the ability to use the money to pay for educational tools, we are leveling the playing field for hardworking Wisconsin parents and students," explained Kind, in a press release.
The Nevada State Treasurer's office administers the State's Section 529 college savings plans, which now includes five savings plans and one prepaid tuition plan.
NewRiver says that "favorable tax legislation and rising college costs have spurred a revival of 529 college savings plans largely because of their tax-free treatment, easy investing, no eligibility restrictions, and total donor control.
The couple has set up 529 college savings plans for each one, with a combined balance of $44,000, to ensure that their children's education costs are covered.
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.
ASSETS IN 529 COLLEGE SAVINGS PLANS rose to an estimated $68.
The answer for many parents is Section 529 College Savings Plans.
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.
529 college savings plans were established several years ago.