529 plans plan operated by a state or educational institution. It’s designed specifically for college savings with tax advantages and potentially other incentives. Plans are offered by individual states. You do not have to be a resident of a particular state to invest in that state’s plan.
What are the biggest advantages of 529 plans? Most people would say that it is federal and state tax benefits, donor retains control of founds, flexibility and many other benefits.
If we talk about tax benefits we should mention benefit of a 529 plan that comes with tax-free withdrawal of earnings that build up in the plan based on the contribution made. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualification education expenses of the designed beneficiary , such as tuition , books , fees, as well as room and board. Contributions to a 529 plan, however, are not deductible.
Another advantage of 529 plans is donor retains control of founds. You, the donor stay in control of the account. You are the one who calls the shots. You decide when withdrawals are taken and for what purpose. This sounds great doesn’t it?
Flexibility , is one more advantage of 529 plan. You may choose a different option of this plan each year,or you may rollover your account to a different state’s program provided no such rollover for your beneficiary has occurred in the prior 12 month
529 plan is designed for student and allows them to go to school where they want . Provide security and a better future. This plan, you can watch as your investment. The 529 plan is great way to save money and get some tax breaks.