A 529 plan is an investment account with the purpose of using the funds for education. If the funds are used towards qualifying education expenses, withdrawals are tax free.
What is considered a qualified education expense?
Tuition and fees, room and board, books and supplies, special services and computers are all considered qualified education expenses.
Can a 529 Plan be transferred to another child?
Yes, a 529 plan can be transferred to immediate family, extended family, and step-family members.
Can I set up both a 529 plan and a prepaid tuition plan?
Yes, while a prepaid tuition plan covers many college expenses, typically there are other expenses associated with higher education that the prepaid plan may not cover, like books and supplies, computers, or room and board. Having a 529 plan in conjunction with a prepaid plan can help avoid funding gaps.
Are contributions to 529 plans tax deductible?
Contributions to a 529 plan are not deductible at the federal level but may be deductible at the state level depending on the state you live in.