<\/span>The 529 Plan\u2019s Tax Advantages <\/span><\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

\n\t\t\t\t\t\t

\n\t\t\t\t\t\t\t

\n\t\t\t\t\t

\n\t\t\t

\n\t\t\t\t\t\t\t

\n\t\t\t\t\t\t

\n\t\t\t\t

\n\t\t\t\t\t\t\t\t

\n\t\t\t\t

Only if the money is used for qualified educational expenses then the earnings in a 529 plan are exempt from federal and state income taxes.\u00a0<\/p>

Except for certain circumstances like death or disability any other withdrawals are subject to taxes plus a 10% penalty.<\/p>

The 529 plan contribution is not tax-deductible for federal income tax purposes, However, tax deductions or credits of varying amounts for contributions to a 529 plan are provided by more than 30 states.\u00a0<\/p>

If you want a state tax deduction or credit then you’ll have to invest in your home state’s plan.\u00a0<\/p>

And if you’re willing to sacrifice a tax break, some states will allow you to invest in their plans as a nonresident.<\/p>

Under Section 529 there are very specific transferability rules that are governed by the federal tax code with 529 plans.\u00a0<\/p>

Unless a beneficiary change is involved the owner is allowed to transfer to another 529 plan once per year.\u00a0<\/p>

To change beneficiaries the owner is not required to change plans.\u00a0The plan may be transferred to another family member, defined as:<\/p>

• Son, daughter, stepchild, foster child, adopted child, or heir.<\/li>
• Brother, sister, stepbrother, or stepsister.<\/li>
• Father or mother or ancestor of either.<\/li>
• Stepfather or stepmother.<\/li>
• brother or sister\u2019s son or daughter.<\/li>
• Brother or sister of father or mother.<\/li>
• Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.<\/li>
• The spouse of any individual mentioned above.<\/li>
• First cousin.<\/li><\/ul>

  Just like other kinds of investing, where if you started earlier you get better returns, even with a 529 savings plan your money will have more time to grow and compound if started early.\u00a0<\/p>

  You’ll most likely be able to lock in a lower tuition rate if you opt for a prepaid tuition plan because many schools raise their prices every year.<\/p>

  Because the beneficiary got a substantial scholarship or decides not to go to college at all and you have money leftover in a 529 plan, then you have several options.\u00a0<\/p>

  One is you can change the beneficiary on the account to another relative. Another option is to let it be in the current beneficiary\u2019s name just in case they change their mind about attending college or go on to graduate school later.\u00a0<\/p>

  In a worst-case scenario, you can always cash in the account and pay the taxes along with a 10% penalty.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

  \n\t\t\t\t\t\t

  \n\t\t\t\t\t\t\t

  \n\t\t\t\t\t

  \n\t\t\t

  \n\t\t\t\t\t\t\t

  \n\t\t\t\t\t\t

  \n\t\t\t\t

  \n\t\t\t

  <\/span>Conclusion<\/span><\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

  \n\t\t\t\t\t\t

  \n\t\t\t\t\t\t\t

  \n\t\t\t\t\t

  \n\t\t\t

  \n\t\t\t\t\t\t\t

  \n\t\t\t\t\t\t

  \n\t\t\t\t

  \n\t\t\t\t\t\t\t\t

  \n\t\t\t\t

  The tax-advantaged accounts that can be used to cover educational expenses from kindergarten through graduate school are 529 plans.<\/p>\n

  Savings plans and prepaid tuition plans are two basic types of 529 plans. The states run 529 plans, and their rules are different.<\/p>\n

  <\/p>\n

  It is not necessary to only invest in your own state’s 529 plan, however doing so may get you a tax break, so check out that plan first.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

  \n\t\t\t\t\t\t

  \n\t\t\t\t\t\t\t

  \n\t\t\t\t\t

  \n\t\t\t

  \n\t\t\t\t\t\t\t

  \n\t\t\t\t\t\t

  \n\t\t\t\t

  \n\t\t\t\t\t

  \n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\tGet Today's Best Home Equity Rates<\/span>\n\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

  What Is a 529 Plan? A tax-advantaged savings plan that is designed to help pay for education is what a 529 plan is.\u00a0 Originally it was only limited to post-secondary education costs and is now… Continue Reading What is a 529 Plan? – The Major Types and Benefits<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":8860,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_newsletter_tier_id":0,"footnotes":""},"categories":[39],"tags":[1648,1652,1649,1650,47,61,1651],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.compareclosing.com\/blog\/wp-content\/uploads\/2021\/06\/What-is-a-529-Plan-The-Major-Types-and-Benefits.jpg","_links":{"self":[{"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/posts\/8821"}],"collection":[{"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/comments?post=8821"}],"version-history":[{"count":5,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/posts\/8821\/revisions"}],"predecessor-version":[{"id":8887,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/posts\/8821\/revisions\/8887"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/media\/8860"}],"wp:attachment":[{"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/media?parent=8821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/categories?post=8821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.compareclosing.com\/blog\/wp-json\/wp\/v2\/tags?post=8821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}