What is a 529 college savings program?
A 529 tax-favored college savings program helps people prepare for the rising costs of educational expenses. Anyone can open an account for a beneficiary or oneself. Depending upon the state, taxpayers can deduct up to a designated amount annually from their state-adjusted gross income. In addition, all earnings on contributions may be exempt from both state and federal income tax if used for qualifying educational expenses. Most 529 college savings accounts can be opened by people of all income levels, and contributions can be as small as $25 via check or $15 per pay period via payroll deduction. Owners of an account may be able to choose types of investments, depending on their risk tolerance. (It is important to note that contributions and earnings are not guaranteed.) For more information about 529 college savings programs including eligible expenses, account management, and much more, see http://www.savingforcollege.com/ and http://www.collegesavings.org/.
A 529 college savings program is a tax-advantaged savings plan that enables you to invest for college free of federal and, sometimes, state income taxes.* You can use this investment to pay for tuition, certain room-and-board expenses, books, supplies, and other qualified higher-education expenses. *Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.
Related Questions
- Can I claim a federal income tax deduction based on my contributions to my Bright StartSM College Savings Program account?
- Can I open an account in the Bright StartSM College Savings Program with money from my childrens UGMA/UTMA account?
- Can I transfer my childs existing Coverdell account into the Bright StartSM College Savings Program?
