Back to School: What You Need to Know about College 529 Savings Plans
It's that time of year again: To the collective relief of parents nationwide, the school year is about to begin. And with that, now is as good a time as any to review 529 education savings plans. After all, the 529 plan remains extremely popular, with over $319 billion in assets, according to some estimates. But 529 plans are also complicated, with very specific rules and regulations, and mistakes in the form of penalties or taxes are costly.
Here's what you need to know about 529 plans:
What is a 529 plan? The name 529 comes from a section in the IRS tax code. Section 529 Qualified Tuition Programs are investment accounts administered by each state and intended to be used for qualified education expenses.
What are the tax benefits? Generally speaking, the earnings on 529 plan contributions can grow free from federal income tax, and withdrawals used to pay for qualified education expenses are free from federal income tax as well. Contributions for contributions, but this varies for each state.
