State 529 College Savings Plan

State-sponsored 529 college savings plans or state 529s for short, our investment accounts that allow you to invest and grow your college savings with a variety of tax benefits. Presently all 50 states and the District of Columbia offer state 529 savings plans.

Tax benefits of state 529 savings plans

There are several tax benefits of state 529 savings plans. Investments in 529 savings accounts tax-free, which means that no federal income taxes levied on dividends that the investments pay while you own them, on capital gains issue realize upon selling assets in the account to cover qualified college related expenses. Withdrawals are also tax-free as long as you use the proceeds for qualified expenses.

In some states 529 contributions qualify for state income tax deductions though they would not for federal income tax deductions. You would need to check with your state’s Department of taxation and revenue to see if you qualify for state tax deductions.

The federal government offers tax credits of up to $1500 per year for the first two years of college in $1000 for subsequent years of college and other qualified forms of higher education you can claim these credits when used money from your state 529 savings plan to pay for tuition and certain related expenses.
Providers

You can establish and fund a State 529 college savings plan through a broker or by working directly with the state. Many states offer several broker sold in direct plans, each of which contains a different set of investment options. Some states offer just one broker sold plan and a similar direct sold plan.

Eligibility

State 529 college savings plans have no residency requirements, and you can invest in any states plan, regardless of where you live most states 529 that no age restrictions contributors and beneficiaries of any age are eligible.

Qualified expenses

You can use the money in your state 529 college savings plan to fund a variety of higher education related expenses, including tuition room and board, supplies, books, and computers.

Contribution limits

State 529 college savings plans have high total contribution limits compared to other college savings plans. The average upper limit is currently over $235,000 and some plans have even higher limits.
Rollover options current tax rules allow you to roll over your college savings account from one state’s plan to another states plans once a year. Most plans charge fees or for such rollovers, which range between $25 and $75.