What is a 529?

"College is the reward for surviving high school." - Judd Apatow

Despite the fact that I haven’t been a full-time student for years fall always makes me think about heading back to school. And as an advisor this makes me think about one of my favorite education funding accounts-the 529.

529s are tax-efficient education savings plans that were created by Congress in 1996 to make it easier to save for “qualified higher education expenses.” Typically run by a state or educational institution, each state has its own plan, and some states have more than one option. The nuances behind each 529 vary from state to state, but the section 529 of the Internal Revenue Code dictates what can and can’t be done by all 529s. One of the main advantages of the 529 is that earnings are not subject to federal tax and generally not subject to state tax when used for qualified education expenses. As of 2018 qualified higher education expenses now include up to $10,000 in annual expenses for tuition in connection with attending an elementary or secondary public, private, or religious school. Pretty cool, right?

There are two types of 529 plans: the 529 prepaid tuition plan and the 529 savings plan. When it comes to education funding the first step is to determine where college funding ranks on your list of priorities. The second step is to consider your options, and the third step is to create a plan. Lastly, it’s time to begin saving! In the coming weeks, as we head back to school, I’ll be sharing more info on 529s and things to consider so stay tuned! Don’t want to wait? CLICK HERE to book a complimentary phone consultation to discuss your situation.

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