Plan Today to Learn Tomorrow

529 Benefits

Top 5 Benefits of a 529 College Savings Plan

529 plans offer unsurpassed income tax breaks.

Earnings in a 529 plan grow federal tax-free and will not be taxed when the money is taken out to pay for college. Other savings vehicles will give up a portion of their earnings to annual income taxes, and also get hit with a capital gains tax at withdrawal.

You, the donor, stay in control of the account.

With few exceptions, the named beneficiary has no legal rights to the funds so you can assure the money will be used for its intended purpose. This differs from UGMA/UTMA accounts, where the child takes control of the assets once he or she reaches legal age.

Simplified tax reporting.

Contributions to a 529 plan do not have to be reported on your federal tax return. You won’t receive a Form 1099 to report taxable or nontaxable earnings until the year you make withdrawals.

Flexibility.

You can change your 529 plan investment options twice per calendar year. You can rollover your funds into another 529 plan one time in a 12-month period. There is no federal limit on the frequency of these changes if you replace the account beneficiary with another qualifying family member at the same time.

Everyone is eligible for a 529 plan.

Unlike Roth IRAs and Coverdell Education Savings Accounts, 529 plans have no income limits, age limits or annual contribution limits.

Products | September 1, 2017 | Evan Coles

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