529 College Savings Plans

The 529 college savings plan is named after section 529 of the Internal Revenue Code and is legally known as a “qualified tuition plan.” What they qualify for is exemption from federal taxes on earnings and withdrawals if the plans are used for qualified education expenses. Qualified expenses include:

• • Tuition
• • School fees
• • Books and school supplies
• • School equipment, such as computers
• • Reasonable room and board expenses (for those students attending school at least half-time)
• • Other expenses associated with special needs services if the beneficiary is a special needs student

529 college savings plans were originally intended to be used to pay for higher education only. At the beginning of 2018, this restriction was loosened to include up to $10,000 per year per beneficiary for elementary or secondary school tuition. Other education expenses still qualify only at the college and university level.

There are two types of 529 plans: (1) college savings plans and (2) prepaid tuition plans.