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Happy 529 College Savings Day: 8 Great Reasons You Need a 529 Plan

May 29th, 2014 · No Comments · Student Loans

by Staff

Happy 529 College Savings Day! 8 Reasons to Open a 529 PlanWhether you have kids who are college-bound someday, or you’d like to go back to school yourself, today is just the thing you may need to get the ball rolling. May 29th is 529 College Savings Day, aimed at raising awareness about the ease and benefits of 529 College Savings Plans.

1)      Earn tax-free dollars on the account.

While you must pay taxes on income prior to investing it into a 529 account, all earnings on the account are federal income tax-free. The only exception would be if withdrawals are not used for college or, more specifically, for qualifying college expenses.

2)      Possibly earn deductions or exemptions on state taxes.

In addition to federal tax-free withdrawals from the 529 plan, some states also offer upfront deductions for contributions or income exemption on withdrawals.

3)      Anyone can open a 529 College Savings Plan, for anyone.

Whether you’re a parent, grandparent, aunt, uncle, brother, sister, or family friend, anyone can open a 529 account for anyone. The beneficiary may be anyone of any age, including yourself.

4)      Minimum contribution requirements are low or non-existent.

Every state has its own 529 plan, with its own unique set of features. This includes minimum contribution requirements. Some states have no minimum, others have initial investment requirements of as little as $25, with subsequent monthly minimum contributions of as little as $15.

5)      Transfer from state-to-state.

Again, every state has its own 529 plans, with its own unique set of features. However, you can move funds from one state’s plan to that of another. The only restriction is you may only do so once a year.

6)      Transfer from beneficiary-to-beneficiary.

If you open a 529 plan for someone who decides not to attend college, all is not lost. You can simply transfer the plan to another beneficiary in the family.

7)      May be used at any college or university.

No matter where you open your 529 college savings plan, it can be used at any college or university in the country. That said, the school must meet eligibility requirements, but that’s not hard to do. It need only be an accredited post-secondary school offering credit toward a bachelor’s degree, associate’s degree, graduate or professional degree, or another recognized post-secondary credential.

8)      May be used for any qualifying college expense.

College expenses covered under the tax-free 529 plan include:

  • Tuition
  • Room and board (including off-campus living provided the student is enrolled at least half-time)
  • Books
  • Fees
  • Supplies
  • Required equipment

For more information, CollegeSavingsPlansNetwork.org is a great resource. Check out special 529 College Savings Day initiatives in your state. And get details and contact info for your state’s 529 College Savings Plan.

Feel like it’s too late to start a 529 plan?

First of all, it’s never too late. Any funds contributed will start earning interest right away and may be accessed immediately. Beyond that, check out these 7 tips to minimize student loan debt – a must-see list in light of interest rates rising July 1.

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