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 ?
* Achieving a Better Life Experience (ABLE) Accounts: Eliminates differences in qualification criteria for ABLE accounts between federal and California tax law to increase contribution limits and allow taxpayers to roll-over Section 529 plans to ABLE accounts.
Another investment bucket to consider is IRC section 529 plans, which can earn income without a tax cost.
Held each year on May 29 or 529 529 Day shines a spotlight on the importance of saving for college and how Section 529 plans can help families meet their goals.
As Baird's Steffen notes, under the bill, Section 529 plans would be able to distribute up to $10,000 per year to cover the cost of K-12 expenses while enrolled in a public, private or religious school.
The section on saving for college explains Section 529 Plans and Coverdell accounts.
Code section 529 plans are not subject to ERISA and they are not listed in Code section 4975, so they are excluded from coverage (see Figure 2.1).
How can you use a traditional individual retirement account (IRA), a Roth IRA, and Section 529 plans for estate planning?
The Act, modeled after Internal Revenue Code Section 529 Plans, provides a mechanism to fund an account in the name of an individual, and allow the funds in that account to accumulate income tax-free.
"College Savings Plans Network 529 Report: A Comprehensive Look at Section 529 Plans." Addendum.
Qualified Tuition Programs, or Section 529 plans, let you save and invest money that's exempt from federal taxes.
A directory of financial aid programs by state, a list of selected scholarship programs, and a list of Section 529 plans by state are included.
Contribute to a Section 529 plan. If you have children or grandchildren, you may want to establish Section 529 plans to help them pay for college.

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