Investment Advisor in Tempe, AZ

National 529 College Savings Plan Day

May 29 is National 529 College Savings Plan Day, a great time to focus on this important tool in planning for future education. 529 College Savings Plan funds were created to help families save for college tuition, books, and room and board. The money you contribute grows tax-free, and qualified distributions aren’t taxed. Although contributions aren’t deductible on your federal taxes, over 30 states offer a tax deduction or credit on state taxes.

Recent federal tax reform has expanded possible uses for these funds. But each state administers their own 529 plan, so rules vary from plan to plan. Since most plans don’t have residency rules, you’re not limited to your own state’s plan. So if your state doesn’t offer a benefit you’re looking for, you may want to shop around. Extra options or better investment performance of another state’s plan might outweigh the benefits of your state’s tax deduction. (Only seven states offer tax parity for contributions to any states’ plan.)

Here are some things you might not know about federal 529 plan rules:*

  1. You can now use up to $10,000 in 529 funds per year on qualified elementary or high school expenses.
  2. You can make a tax-free rollover of 529 funds to an ABLE account with the same beneficiary or a family member beneficiary. (ABLE accounts are like 529s but are intended to cover expenses of individuals with disabilities.) Funds that roll over count against the $15,000 annual contribution limit for ABLE accounts.
  3. You can pay up to $10,000 in student loans with 529 plan funds.
  4. There is no beneficiary age limit. Funds can be used for career development programs, certificates, and advanced degrees. In fact, anyone can set up and benefit from a 529 – a friend, your grandchild or relative, even yourself if you want to consider an encore career or continued education.

Opening a 529 account is an investment decision. To find out if opening a 529 is right for you or for help in choosing the right 529, call our office. We can answer your 529 questions and guide you through the financial planning process.

*Remember to check your state plan for its specific rules.