Glossary
529 Savings Plan (College Savings Plan)
A 529 plan is a tax-advantaged investment account designed to help families save for education expenses, including college tuition, K–12 tuition, and student loan repayment. Earnings grow tax-free, and withdrawals are also tax-free when used for qualified education costs.
Who can open a 529 plan?
Anyone can open a 529 plan—parents, grandparents, relatives, or even the student themselves—as long as there is a named beneficiary.
What expenses can a 529 plan be used for?
Qualified expenses include college tuition, fees, books, supplies, room and board, K–12 tuition (up to $10,000 per year), and student loan repayment (up to $10,000 lifetime per beneficiary).
Are there tax benefits to a 529 plan?
Yes. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses. Some states also offer tax deductions or credits for contributions.
What happens if the funds aren't used for education?
Non-qualified withdrawals are subject to income tax and a 10% penalty on earnings. However, the account owner can change the beneficiary to another qualifying family member.
Can I use a 529 savings plan in any state?
Yes. You can open a plan in any state and use the funds at eligible institutions nationwide, and even some abroad.
Is there a contribution limit to 529 plans?
There’s no annual IRS contribution limit, but contributions are subject to gift tax rules. Many states cap total account balances (often between $300,000–$500,000 per beneficiary).
Subscribe to our newsletter
Get the latest on finding, evaluating, and working with financial advisors; delivered right to your inbox.
