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529 plans by state
529 college savings plans serve as tax-advantaged vehicles that allow you to invest in your child’s future college education. Think of them as 401(k) plans for education. Simply put, you are contributing funds to a professionally managed investment portfolio that you can tap down the road. As you invest, your earnings grow tax-free. You can also withdraw your money any time without penalty as long as you use it to fund qualified higher education expenses like tuition and mandatory school fees at eligible institutions. Today, all states and Washington, D.C. sponsor at least one 529 college savings plan. Some states provide additional tax benefits by letting you make tax-deductible contributions up to certain limits.
Click here to see an interactive map of 529 plans by state.
States that offer only one 529 plan.
States that offer two 529 plans. Usually one will be a direct-sold plan and the other advisor-sold.
States that offer three 529 plans. These will usually be a combination of advisor-sold, direct-sold and prepaid 529 plan offerings.
Only a handful of states offer four or more 529 plans. These will usually be a combination of advisor-sold, direct-sold and prepaid 529 plan offerings.
529 plan history
529 plans emerged out of Section 529 of the Internal Revenue Code, which established the Qualified Tuition Program (QTP) in 1996. Today, states sponsor various kinds of 529 plans. The most common are investment savings vehicles. Some of these plans are direct-sold, which means you handle all investment decisions on your own. Advisor-sold 529 college savings plans, on the other hand, feature the support of a financial advisor who can guide you through the entire college savings process. A third type is known as a 529 prepaid tuition program. Through this type of plan, you essentially purchase college credits at current prices. Your child can then redeem those credits in the future regardless of how much tuition has risen.
529 plan benefits
In addition to unmatched tax benefits, 529 plans offer other advantages as well. For example, your student can combine your 529 plan savings with any financial aid package and scholarship he or she earns. In fact, only a small fraction of a 529 plan’s value would affect a student’s financial aid eligibility when a custodial parent owns the 529 plan account.
Plus, no rule limits you to opening an account with just one 529 plan or only one that your state sponsors. Anyone who is 18 or older with a valid Social Security or tax identification number can open a 529 college savings plan sponsored by any state. Some states sponsor their own scholarship programs, while other plans let anyone make tax-deductible contributions regardless of residency.
Where can I use my 529 plan?
529 plans can fund qualified educational expenses at virtually any school that participates in a financial aid program that the U.S. Department of Education administers. That definition covers four-year universities, community colleges, trade schools and even some foreign institutions.
What are qualified higher education expenses?
You can withdraw money from your 529 plan tax-free to cover qualified higher education expenses. Luckily, these include some of the most important and priciest college expenses you’ll encounter. Below are a few examples:
- Mandatory fees
- Room and board that doesn’t exceed certain estimated costs of on-campus living
- Books and school supplies required for enrollment
- Electronics and even Internet access required to take classes
In addition, the Tax Cuts and Jobs Act that went into effect in January 2018 further expanded the definition of 529 plan qualified expenses. The federal government would not impose any penalty on you if you withdraw up to $10,000 a year from your 529 plan to cover tuition at private, public and religious K-12 schools. However, law makers are still debating how to treat such withdrawals for state tax purposes.
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