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).
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
* 16 Best & Worst 529 College Savings Plans of 2016: Morningstar
The report finds that RIAs' concerns about the fees imposed by providers of 529 college savings plans has increased to 45 percent in 2014 from 28 percent in 2012.
Austin, TX, November 15, 2010 --(PR.com)-- Banks, brokers and financial planners do not tell the investing public all the facts about tax deferred investing, college savings plans and the coming tax system overhaul's affect on 401ks, IRAs and Roth accounts.
529 College Savings Plans offer important tools for increasing educational levels by improving K-12 student achievement, minimizing dropouts, supporting our lagging financial aid system, and reducing dependence on expensive student loans.
The measure would allow a 50 percent tax credit for Section 529 college savings plans. Joint filers earning up to $60,000 annually, heads of households making up to $45,000 a year and others making up to $30,000 a year could claim up to $2,000 in credits.
ALTHOUGH MOST PARENTS AND GRANDPARENTS HELP pay for their kids' and grandkids' college education, most producers say 529 college savings plans account for less than 5% of their business, according to a study recently conducted for John Hancock Life Insurance Company, Boston.
For younger children, financial planners generally recommend college savings plans. For middle school children, they recommend prepaid plans, especially if the parent knows the child is more likely to go to school in state,
SPRINGFIELD - A series of seminars will kick off Tuesday to help people learn how to take advantage of college savings plans established by the state of Oregon.
College savings plans are tax-sheltered accounts whose earnings can be tax free when used for eligible higher-education expenses.
New developments with Coverdell Education Savings Accounts (formerly known as Education IRAs) and Section 529 College Savings Plans may provide some relief.
"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.
Financial Research Corp., a Boston-based division of Strategic Insights, discloses this finding in a first quarter 2013 report on IRC section 529 college savings plans. The report is based on year-over-year highs in assets under management and investor usage of 529 plans.

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