Do you have questions about a 529 Plan? Of course you do, everyone does. There is so much information, but no one ever answers the question that you have directly. Below you will find a list of the top 27 questions about a 529 college savings plan. Feel free to search for your specific question, or read as many as you would like.
Just quick on the question, or the plus sign, to open up the individual answer.
In addition to this frequently asked question guide all about 529 plans – I also wrote an in depth, step by step guide to 529 plans.
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A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education expenses. 529 plans, sometimes called “qualified tuition programs,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. Anyone can open a 529 account for a child, regardless of income – there is no income limitations or income restrictions.
There are two types of 529 plans: prepaid tuition plans and college savings plans. Prepaid plans allow you to purchase tuition credits at participating colleges and universities at today’s prices. College savings plans allow you to save money in an account that can be used for future college education expenses at any eligible institution. With a 529 plan, your money can grow tax-deferred and you receive tax breaks on qualified withdrawals (or qualified distributions) as long as they’re used for qualified education expenses.
Qualified expenses include tuition costs, fees, books, supplies, and equipment required for enrollment or attendance. 529 plans are a great way to save for college, but there are a few things to keep in mind. First, 529 plans are subject to change – so it’s important to stay up-to-date on the latest rules and regulations. Second, make sure you understand the fees associated with 529 plans. And finally, remember that 529 plans are for eligible expenses – so non-qualified withdrawals used for other purposes may be subject to federal taxes and federal tax penalties on the earnings portion.
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A 529 plan is a state-sponsored investment account (sub accounts are similar to mutual funds) that can be used to cover qualified educational expenses for a designated beneficiary, such as a child or grandchild. The account owner retains control of the account and can withdraw plan assets at any period of time, but if the money is used for non-qualified expenses, they may be subject to taxes and penalties.
Anyone can open a 529 account, regardless of income or assets. There are no age limits or restrictions on who can contribute to a 529 account. You can contribute as much money as you want, but there may be state-specific limits on the amount that can be deducted from your taxes.
529 plans can be used to cover a variety of qualified educational expenses, including tuition, fees, room and board, books and supplies, and certain other basic types of expenses. The money in a 529 account can be used at any eligible educational institution, including colleges, universities, and vocational schools.
Who can use a 529 plan? Anyone can open a 529 account, regardless of income or assets. There are no age limits or restrictions on who can contribute to a 529 account. Who can contribute to a 529 plan? Anyone can contribute to a 529 account. There are no income or asset limits.

Qualified 529 Plan Expense Questions
What are Qualified 529 Plan Expenses? Qualified 529 Plan expenses are those incurred by the designated beneficiary of the 529 plan during their enrollment at an eligible educational institution. Eligible institutions include any college, university, vocational school, or other post-secondary school that is eligible to participate in a student aid program administered by the U.S. Department of Education, including public college, private school, trade schools, or religious schools.
Qualified 529 Plan expenses include tuition, fees, books, supplies, and equipment required for the enrollment or attendance of the designated beneficiary at the eligible institution. Room and board expenses may also be considered qualified 529 Plan expenses if the designated beneficiary is enrolled at an institution on at least a half-time basis.
What expenses are not considered qualified 529 Plan expenses? Expenses that are not considered qualified 529 Plan expenses include the cost of insurance, medical expenses (including dental and vision care), and room and board expenses if the designated beneficiary is not enrolled at an institution on at least a half-time basis.
What if the designated beneficiary receives a scholarship? If the designated beneficiary receives scholarship funds or other form of financial aid that covers some or all of the qualified 529 Plan expenses, the amount of the scholarship or financial aid may be used as payments for non-qualified expenses. However, if the designated beneficiary withdraws from the eligible institution before completing the academic program, the amount of the scholarship or need-based financial aid that was used to pay for non-qualified expenses may be subject to taxes and penalties.
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College Savings: Annual Gift Limitations, Estate Tax Purposes, Internal Revenue Services
There are a few key things to keep in mind when it comes to 529 college savings accounts and estate tax purposes. First, the annual gift limit for 529 plans in 2023 is $17,000 per donor, per beneficiary (gift tax exemption). This means that if you have multiple 529 plans, you can give up to the annual gift tax exclusion of $17,000 to each one without incurring any gift taxes.
You can make an initial investment of $85,000 ($17,000 x 5) to cover a five year period upfront, if you want. Speak with a tax advisor and financial professional before making this decision.
Secondly, 529 plans are considered taxable estates for estate tax purposes. This means that if you die with a 529 plan, your beneficiaries will have to pay estate taxes on the value of the plan. However, there are a few ways to minimize the impact of estate taxes on your 529 plan.
One way is to name a specific beneficiary for your 529 plan. This way, your 529 plan will not be included in your taxable estate. Another way to minimize the impact of estate taxes on your 529 plan is to make sure that your 529 plan is properly funded. This means that you should make sure that your 529 plan has enough money to cover the college costs.
Lastly, you should consult with a financial advisor to make sure that your 529 plan is properly structured to minimize the impact of estate taxes.
Still, have questions and want more information? Here are some excellent other resources:
- 529 Search and Comparison Tool
- FINRA’s Saving for College website.
- FINRA has developed a tool to help you compare how plan fees and expenses can reduce returns.
- SEC’s Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio.
- U.S. Department of Education’s Federal Student Aid website.
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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.