Your 529 education savings plan Chalkboard with a piece of chalk and text 529 Plan 3D Illustration
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 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.

529 plans are versatile savings accounts that offer federal, and sometimes state, tax benefits, while minimizing impact on financial aid. They are operated by a state or educational institution, and are designed to help families set aside funds for future college and K-12 education costs.

529 plan history

Section 529 was added to the Internal Revenue Code by a 1996 piece of legislation authorizing “qualified tuition programs”, giving state programs both their popular name and tax-deferred status. Funds invested in these programs are not taxed federally when used for “qualified higher education expenses”, the definition of which has been expanded in 2015 to include computers and in 2017 to include up to $10,000 in K-12 tuition.

State plans are OK for out of state colleges

529 Plans can be used to meet costs of qualified colleges nationwide. In most plans, your choice of school is not affected by the state your 529 savings plan is from. You can be a CA resident, invest in a VT plan and send your student to college in NC. Check to see if your institution is eligible under 529 rules.

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