Education Savings

What is a 529 Plan?

 

529 Basics

  • A 529 plan is a tax-advantaged investment plan designed to help families to save for a beneficiary’s (typically one’s child or grandchild) future higher education expenses. While commonly referred to as 529 plans, they are formally known as “Qualified Tuition Programs,” as defined in Section 529 of the Internal Revenue Code, and are administered by state agencies and organizations.

  • Savings in a 529 plan grow free from federal income tax, and withdrawals remain tax-free when used for qualified higher education expenses. Additionally, many states mirror the federal 529 plan tax advantages by offering state tax-deferred growth and tax-free withdrawals for qualified higher education expenses.

 

Education Savings Plan & Services | JTL Wealth Partners

Why State Plans Differ

  • Each state that offers a 529 plan determines how its plan is structured and which investment options are offered. While many plans allow investors from out of state, there can be significant state tax advantages and other benefits for in-state residents. These can include state tax deductions, matching grants, and scholarship opportunities, protection from creditors and exemption from state financial aid calculations.

529 Plans Help More Children Reach College

  • 529 college savings plans are tax-advantaged savings plans that help families save for higher education so they can be less reliant on student loans.

There are two types of plans:

  • College Savings Plans – You contribute post-tax money into your plan and those contributions are invested based on the specific plan and your risk tolerance. Your earnings are yours to use tax-free as long as they are used for qualified higher education purchases.

  • Prepaid Tuition Plans – 10 states – which include Florida, Maryland, Massachusetts, Michigan, Mississippi, Texas, Virginia and Washington – and one not-for-profit organization let you pre-purchase future tuition at a predetermined rate today. An account owner purchases full or partial years or individual units of tuition for a child, and when the child decides to go to college, the plan pays out based on tuition rates from when the account was originally opened.

Comparing College Planning Vehicles


We offer access to 29 different 529 plans, if you would like to learn more, please schedule a call to learn more about 529 plan benefits

 

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