A 529 College Savings Plan is a plan operated by a state or educational institution named after Section 529 of the Internal Revenue Code. 529 Plans have certain tax advantages that make it beneficial to save for college and other qualifying education expenses for a designated beneficiary, such as a child or grandchild.
What are the benefits of a 529 Plan?
- Although contributions to the plan are not tax deductible, earnings in a 529 plan grow federally tax-free and will not be taxed when the money is taken out to pay for qualified education expenses.
- Many States have a state tax deduction for contributions to a 529 Plan.
- Generally the donor (usually a parent or grandparent) has complete control over the funds.
- Unlike Roth IRAs and Coverdell Education Savings Accounts, 529 plans have no income limits or age limits, and have significantly increased annual contribution limits.
- The accounts are generally low fee and low maintenance.
- The accounts have great flexibility. Investment options can be changed twice per calendar year, funds can be rolled over from one 529 plan to another once a year and beneficiary changes are permitted.
Planning for future education expenses can be overwhelming. A 529 Plan is one of the many tools to help plan for this future life event. Contact ClarkSilva today to discuss your child or grandchild’s education savings plan today!