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 ?
Obama's plan would reduce the tax benefits of future contributions to the popular 529 college savings plans.
Maryland: College Savings Plans of Maryland - College Investment Plan (T.
According to the Morning-star 2013 529 College Savings Plans Industry survey, at approximately $5 billion, it ranked eighth of forty-seven state college savings programs offered as of December 31, 2012, and houses what is generally recognized as one of the top college savings plans in the country.
More than a dozen states operate similar plans and none has run into financial problems, said Chris Hunter, a program manager with the College Savings Plans Network, a national clearinghouse for college savings programs.
Clients facing future higher education costs next should investigate state-sponsored tax-advantaged college savings plans.
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.
The worksheets are helpful in making estimates; the appendix includes data on college savings plans for each state, as well as a reference guide for obtaining additional information.
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.
The future stability and health of the state's college savings plans depend not only on prudent, professional and ethical management of investments, but, even more importantly, on the trust of the investors - Oregonians who are socking away their hard-earned dollars in the hopes of being able to afford to send their children to college.
The tax-free distribution feature of college savings plans is a giant advantage over accumulating assets in the parent's name, as earnings in the parent's account are currently taxable.
Through AARP([R]) College Savings Solutions from TIAA-CREF, AARP members can learn about the many benefits of college savings plans and gather specific information about the various 529 plans available to them.
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.

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