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Looking to save for college? Take a number – the number 529, to be exact. College Savings Accounts, or 529s as they’re nicknamed (after the IRS tax code), have become all the rage in recent years. So, what are they? And what options do you have when using a 529 to save for your child’s college education?
A 529 pre-paid tuition program allows you to pay any future college costs at today’s current tuition rate. With rising college expenses, this plan may work for you. However, there are residency requirements and portability limitations, so be sure you understand all upsides and downsides.
529 state college savings plan. Every state in the U.S. has a college savings plan, which allows you to put money into a private savings account. The account is managed by a state-approved financial institution and comes with a variety of investment options. Each month you can add money to your account, even directly from your paycheck if you wish. The account grows tax-deferred, and in some states, you can even receive a tax break for using the accounts.
As college costs continue to rise, policymakers have recognized that more and more children plan to attend college and need a way to pay for it. The Tax Cuts and Jobs Act, passed in 2017, expanded the list of eligible 529 expenses to include K-12 private school tuition. The SECURE Act, passed in 2019, allows up to $10,000 from a 529 plan to be used to repay student loans and allows 529 funds to be used for qualifying apprenticeships.
Contact our office as soon as possible if you are looking for college savings options or have questions about the details of the accounts. We’re here to help! The only thing left to do is remember the number: 529.
DISCLOSURE: A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at least one 529 plan. Before buying a 529 plan, you should inquire about the particular plan and its fees and expenses. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or application fee savings are available depends on your state of residence. For tax advice, consult your tax professional. Non-qualifying distribution earnings are taxable and subject to a 10% tax penalty.