How do college savings plans work?
Typically, a parent or grandparent sets up a plan for a child or grandchild, although you can establish one for anyone. You can make a single contribution or a series of contributions to the plan. Your contribution is a gift, and it’s not tax-deductible. You aren’t allowed to contribute beyond what’s considered necessary to pay for your child’s college expenses (each plan sets it own limit). Your child can use the funds that accumulate to pay school expenses at any college on the plan’s list of eligible schools. Every state now has a college savings plan in place or under development. With so many choices, how do you decide which one is best for you? Here are some things to consider. What are the tax benefits? Once in the plan, your money grows tax-free. Provided the funds are used to pay for your child’s qualified college expenses, withdrawals are tax-free. Qualified expenses include tuition, fees, books, supplies, and certain room and board costs. Most state plans are available to bo
