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 ?
When looking for other expenses, the list of qualified tuition and related expenses listed above should not be confused with what expenses qualify for a distribution from qualified tuition programs such as a Sec.
* State-run Qualified Tuition Programs (www.irs.gov/publications/p970/ch08.html), or 529 Plans, allow families to lock in today's tuition rates for state schools.
These plans, officially qualified tuition programs, are named for the IRC section that provides their advantages.
Referred to as qualified tuition programs, IRC section 529 plans encompass prepaid plans to cover tuition and fees for higher education or savings plans that can be used for a variety of college or graduate school costs (as well as limited amounts for primary and secondary school starting in 2018, as explained below).
Qualified Tuition Programs, or Section 529 plans, let you save and invest money that's exempt from federal taxes.
Before creation of the Educational Savings Account (ESA) and Qualified Tuition Programs (QTP, also referred to as 529 plans), parents who wished to give money or property to their minor children could do so in four basic ways:
The total amount of qualified tuition and related expenses for the deduction for qualified tuition and related expenses is reduced by the amount of such expenses taken into account in determining the exclusion for distributions from qualified tuition programs. For these purposes, the excludable amount under IRC Section 529 does not include that portion of the distribution that represents a return of contributions to the plan.
Tate Florida Prepaid College Program contracts purchased and Florida College Savings agreements established under part IV of chapter 1009." (14) CS/HB 599 expanded the exemption to "[a]ll qualified tuition programs authorized by s.
See Q 812 for the tax treatment of distributions from qualified tuition programs. See Q 858 for the estate tax treatment and Q 905 for the gift tax treatment of qualified tuition programs.
Also known as Qualified Tuition Programs, initial contributions to these plans must come from after-tax income.
Eligible tax-favored accounts include traditional and Roth IRAs, health savings accounts, Archer MSAs, Cover-dell education savings accounts and qualified tuition programs, also known as QTPs or 529 plans.
Qualified Tuition Programs are yet another savings tool to allow funds to grow tax-deferred and can be established by parents, grandparents, relatives or non-relatives.

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