529 college savings plan

(redirected from College-Savings Plans)

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 ?
Strong, based in Wisconsin, and another money manager, MFS Investment Management, oversee most of the $180 million in funds in the state's four college-savings plans, which offer tax advantages that encourage parents to save for their children's education.
Beginning in 2001, Colorado residents can deduct all contributions to college-savings plans from state income tax (earnings growth already is exempt).
Still, even the best deals usually have a catch, and college-savings plans are no exception.
Through its Upromise affiliates, the company also manages more than $19 billion in 529 college-savings plans, and is a major, private source of college funding contributions in America with 11 million members and more than $475 million in member rewards.

Full browser ?