529 Plans Highlights

When considering 529 plans as a way to save for college, you should study the 529 plan you are interested in carefully. Certain rules are different for different 529 plans. Some of the common 529 plans highlights are listed below.

Points to consider about 529 plans

• Any US citizens or US residents of 18 or over can open establish a 529 plan or a 529 account for anyone.

• There is no age restriction on beneficiary of the 529 plan.

• There is no income restriction on who can open a 529 plan.

• The beneficiary of a 529 plan can be changed at anytime (but is free of federal income taxes if the new beneficiary is a member of the previous beneficiary's family, otherwise the earnings portion of the withdrawal will incur income taxes and possibly a penalty).

• You can start a 529 plan and can contribute as little as approximately $25, depending on the individual 529 plan.

• The total value of the 529 plan college savings account per beneficiary must not exceed approximately $269,000. Again, this upper limit of 529 plan is different for each 529 plan.

• You can open more than one 529 plan college savings account for the same beneficiary but the total of all 529 plan college savings accounts must not exceed $269,000, or any other limit per the rule of the specific 529 plan.

• You (the owner) who opened the 529 plan college savings account can retain the control of the 529 plan college savings account.

• The fund in the 529 plan can be used to pay expenses at any:

  • eligible college,
  • university,
  • post-secondary vocational training institution,
  • graduate school, professional school, and
  • post secondary vocational school.

These eligible 529 plans expenses include tuition, fee, room and board, books and supplies as well. In general, eligible schools are schools in the US Department of Education. If a student transfers schools, the student can continue to draw on his fund.

• No withdrawal requirements on 529 plans - but if funds in 529 plans are not used for higher education expenses, investment earnings in the withdrawals are subject to income taxes and in some cases a 10% federal penalty tax.

• Earnings on investments in 529 plans can compound without federal income taxes. Currently, withdrawals for qualified higher education expenses will not be subject to income tax.