Congress created 529 Education Savings Plans in 1996 under Section 529 of the Internal Revenue Code. They are state-sponsored, tax-advantaged vehicles for qualified post-secondary education expenses, such as tuition, fees, books, required supplies, equipment, room and board. There are two types of 529 Plans: savings plans, which allow families to save for expenses, and prepaid tuition programs, which generally allow families to make advance tuition payments to cover future attendance at a designated in-state public college or university system. Most states offer a 529 plan, and some states offer both savings and pre-paid plans.
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.
Information provided by College Savings Plan Network and College Savings Foundation has been referenced on this page. To visit their websites go to:
College Savings Plan Network: https://collegesavings.org
College Savings Foundation: https://www.collegesavingsfoundation.org/