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 ?
Also called "qualified tuition plans," they are sponsored by states, state agencies, or educational institutions.
Also known as qualified tuition plans, 529s are available in every state and the District of Columbia.
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and international clients with regard to acquisitions, dispositions and other restructurings; financial products tax, tax accounting and tax reporting matters; cross-border financing debt-equity issues; section 529 qualified tuition plans; and numerous other business and individual tax issues.
The IRS has provided no guidance on whether distributions from section 529 qualified tuition plans (QTPs) and Coverdell accounts (CAs) are treated as provided by the student or by the account owner.
The introduction of qualified tuition plans (QTP) under Sec.
The bill also updates limitations on exempt property by: increasing the dollar limitation on household goods from $10,000 to $20,000; changing the personal automobile exemption to a personal motor vehicle exemption based on gross weight and limiting the exemption to two motor vehicles; and including all qualified tuition plans authorized by Internal Revenue Code [section]529.
529 plans, legally known as "qualified tuition plans," are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
Distributions from qualified tuition plans (QTP) or Coverdell education savings accounts (ESA) are generally not taxable to the extent they are used to pay qualified educational expenses.
The treatment of both qualified tuition plans and college savings accounts in the federal financial aid formula may significantly decrease the eligibility for financial aid.
Two relatively new government tax incentives are very good savings vehicles--the Coverdell Education Savings Accounts (ESAs) and the 529 State-Sponsored Qualified Tuition Plans (QTPs).
The paper contains background information on qualified tuition plans, the saving and asset allocation model used in the analysis, with an explanation of the way various parameters are calibrated, baseline simulation results, some sensitivity tests, and concluding remarks.

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