What’s a 529 Plan, Anyway?
A 529 plan is a college savings plan that is operated by either a state institution or an educational institution. It is designed to assist families in setting aside money for college costs that may be incurred in the future. It is named after an Internal Revenue Code, which outlined the creation of such a plan in the year 1996 called, “Section 529”. There are tax advantages and other types of incentives offered by the 529 plan that make it easy to set aside money for the post-secondary education and training of an individual, such as a child, a grandchild, or other person. This college savings plan may be used to meet the monetary expectations of colleges that are considered to be qualified, on a national level. In this brief guide, you will learn important facts about the 529 plan.
The savings that are acquired through the 529 college savings plan may be put to use to pay for the tuition, the required textbooks and workbooks, and other types of educational-related expenses at colleges and universities that offer two-year and four-year degrees. In addition to this, the money acquired through the plan may be used to fund an educational training program at vocational-technical schools within the United States. In some instances, the funds from the college savings plan may also be used to fund educational training that is received at a foreign-based educational institution. Residents of the United States that are 18 years old or older are permitted to invest in a 529 plan for post-secondary education. The individual starting this type of savings plan will be required to have a mailing address within the United States and have either a Social Security number or a specific Tax ID Number.
A 529 plan offers a number of tax breaks that are considered to be unsurpassed. Once you invest in this type of savings plan, you will immediately find that the contributions that you put towards the plan are not deductible on the federal-based tax return; however, the contributions that you make towards the college savings plan grow in a tax-deferred manner. As a result of this fact, in the end, you will find that the contributions become tax-free. This is made possible and outlined in the Pension Protection Act that was put into place in the year 2006. When you start a 529 plan, it is important to research what types of tax breaks you may be entitled to within your state. In many instances, you may receive an upfront deduction or an income exemption on the contributions that you put towards the plan.
A 529 plan for college is considered to be an easy and low-maintenance method of acquiring money that will be needed for the education and training that colleges offer. You must simply look at the plan options, decide which is best for your needs, and complete an enrollment form. You may then start contributing to the plan or set up a plan where money is automatically deducted and put towards the college savings plan. If you have an interest in starting a 529 plan, you should seek the assistance of an individual that works at the treasurer’s office within your state, or enlist the help of an investment company that may act as the program manager to protect and monitor this investment.