A 529 plan is a tax-advantaged savings plan designed to help pay for education. Originally limited to post-secondary education costs, it was expanded to cover K-12 education in 2017 and apprenticeship programs in 2019. The two major types of 529 plans are savings plans and prepaid tuition plans.
Savings plans grow tax-deferred, and withdrawals are tax-free if they’re used for qualified education expenses. Prepaid tuition plans allow the account owner to pay in advance for tuition at designated colleges and universities, locking in the cost at today’s rates. 529 plans are also referred to as qualified tuition programs and Section 529 plans.
Things To Know:
- 529 plans are tax-advantaged accounts that can be used to cover educational expenses from kindergarten through graduate school.
- There are two basic types of 529 plans: savings plans and prepaid tuition plans.
- 529 plans are run by the states, and their rules differ.