A 529 plan is a lot like a Roth IRA, but it’s designed for education expenses instead of retirement. Originally, you could use a 529 to cover only post-secondary education costs. But it was expanded to include up to $10,000 per beneficiary for K-12 education under the Tax Cuts and Jobs Act (TCJA).
Is a 529 plan considered an asset?
A 529 college savings plan account that is owned by the student or the student’s parent must be reported as an investment asset on the Free Application for Federal Student Aid (FAFSA). Distributions from such a 529 plan are not reported as income on the FAFSA.
What are the different types of 529 plans?
There are two main types of 529 plans—prepaid tuition plans and savings plans. With a prepaid tuition plan, money is paid in advance for the child’s tuition and fees at certain schools. The savings plans are similar to IRAs and are considered to be tax-advantaged investment vehicles.
Can a 529 plan be used to pay for college?
You can invest in any state 529 plan, not just your own state’s 529 plan. 529 plans can be used to pay for college costs at any qualified college nationwide. In most plans, your choice of college is not affected by the state that sponsored your 529 college savings plan.
Who is the owner of a 529 plan?
Most 529 plans are run by states, and there is one prepaid plan (more on that in a minute) run by a bunch of private colleges. Each 529 plan account has an account owner (often, though not always, a parent) and the beneficiary (the student). The owner controls the investments and chooses the beneficiary, which could be themselves.
When was the first 529 tuition plan created?
The first 529 plan was a prepaid tuition plan established by the Michigan Education Trust (MET) in 1986. 529 plans are named after Section 529 of the Internal Revenue Code (IRC), which was added in 1996 to authorize tax-free status for ‘qualified tuition programs’.
