529 Day 2016 - Are You Investing for Your Child's College Education
May 29, 2016
Currently offered by all FIFTY states, 529 plans get their title from Section 529 of the Internal Revenue Code, which established federal tax advantages for qualified college savings plans. These programs help you plan and save for qualified higher education costs at eligible universities. There are 2 basic 529 plan choices -- pre-paid tuition plans and a 529 Savings Plan, which enable households to prepay for college tuition, necessary costs, and savings programs. The tax benefits of 529 plans are similar to those for 401K retirement savings, however upon withdrawal, earnings are tax free when employed for qualified college costs. Furthermore, some states, offer income tax benefits for those who contribute to that state's 529 program.
The person who opens the 529 account, not the real beneficiary, maintains full control of their 529 money. Funds in 529 accounts may be rolled over to another state's plan-- and can be taken out at any time for any purpose. Withdrawals not designated for qualified college costs carry a 10% federal penalty on earnings unless the student receives a complete scholarship, ends up being disabled, or dies. Unlike other college savings programs, 529 plans do not have earnings restrictions. The maximum savings amount is substantial-- in Virginia, for instance, presently as much as $350,000 can be invested for each individual.