A 529 plan is a tax-deferred College Savings Plan which can be used to fund a child's education. Contributions to the plan can grow tax-deferred, and income distributed tax-free as long as it is being used for qualified education expenses, which can include room, board, and tuition at universities. The plans are state sponsored, so specific rules will differ from state to state. As such, it is wise to consult with your tax advisor before pursuing a 529 plan investment.
If money is withdrawn from a 529 plan for purposes other than qualified education expenses, then the withdrawal is subject to income tax as well as a 10% federal tax penalty on earnings.
The existence of a 529 plan benefiting a student may reduce that student's eligibility for need-based financial aid.
More information about 529 plans can be found at http://www.sec.gov/investor/pubs/intro529.htm
This is great. I love all the details and information you are providing here. I think this will help people get a start on their own financial planning!
ReplyDeleteKeep up the good work!
A 529 plan is a great way to save away money for your children's education. In Ohio, we get state tax benefits as well by contributing to the one run by the state:
ReplyDeletehttp://www.collegeadvantage.com/