529 Savings Plan


DEFINITION of '529 Savings Plan'

A tax-advantaged method of saving for future college expenses that is authorized by Section 529 of the Internal Revenue Code. The plan allows an account holder to establish a college savings account for a beneficiary and use the money to pay for tuition, room and board, mandatory fees and required books and computers. The money contributed to the account can be invested in stock or bond mutual funds or in money market funds, and the earnings are not subject to federal tax (or state tax, in most cases) as long as the money is used only for qualified college expenses. The plans are open to both adults and children.

BREAKING DOWN '529 Savings Plan'

States have their own 529 savings plans with unique features. An individual can open a 529 plan in any state, and the plan does not have to be in the account holder's or beneficiary's state of residence.

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  1. Can mutual funds have beneficiaries?

    The ownership of a mutual fund account can allow for beneficiaries depending on how the account is registered. For example, ... Read Full Answer >>
  2. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  3. Are Cafeteria plans subject to FICA, ERISA or FUTA?

    Cafeteria plans are employer-sponsored benefit plans that provide both taxable and nontaxable, or qualified, benefit options ... Read Full Answer >>
  4. Who decides if a financial security should be escheated?

    There is no one entity who "decides" to escheat assets. Rather, financial institutions are required to report inactive accounts ... Read Full Answer >>
  5. How long do I need to keep income tax records?

    Keep all tax-related records for at least three years. For example, keep your 2015 tax return, filed in early 2016, at the ... Read Full Answer >>
  6. What is the annual contribution limit for a 529A account?

    Contributions to a 529A plan are limited up to the annual gift tax exclusion limit, currently $14,000 a year in after-tax ... Read Full Answer >>

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