The 529 College savings account is designed to be flexible and beneficial for your family. While there are quite a few unique features to different state plans, you should be familiar their general feature and have a good understanding on how your 529 college savings account works.
10 Common 529 College Savings Plan Questions
Who can contribute to a 529 college savings account?
Anyone! There are no income restrictions to making contributions and your friends and family can also make contributions. Some states set maximums of up to around $300,000 total, so make sure you stay within the limits.
What happens if my child gets a scholarship?
If the beneficiary of the account gets a scholarship and does not need to use all the funds within the account, the funds can be rolled to another sibling or relative without penalty.
What happens if my child dies or becomes disabled?
The money within your 529 college savings account can be rolled to another sibling or relative with no penalty.
How many 529 College Savings Accounts can I have?
There are no limits on the number of 529 college savings accounts that you can set up.
Can I withdraw the money for an emergency?
If you withdraw money from a 529 plan for reasons other than higher educational expenses, the interest will be considered taxable and there will be a 10% penalty assessed.
Can I roll stocks into a 529 college savings plan?
No, only cash can be contributed into a 529 college savings account.
Can I have one 529 college savings account for all my children?
Each child or beneficiary should have a separate account set up for his or her benefit. Accounts cannot be shared unless a the beneficiary is no longer in need of the money – which will trigger a rollover to a new beneficiary.
Can I use money from my 529 plan to pay student loan interest?
No, student loan interest is not considered a qualified educational expense.
Can I take a state income tax deduction on my 529 plan contribution?
Yes, but it depends on which state you live in. Some states allow you to claim your contribution as a deduction from state income taxes as long as you’re a resident.
Can I use the money for anything I want once college starts?
The money within your 529 college savings plan can be distributed tax and penalty free as long as it’s used for educational expenses like tuition, room and board, books, fees, and computers.
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