529 College Savings Plans
The 529 college savings plan is a tax-free savings plan that offers families professionally managed portfolios to help meet rising college costs. The 529 plan is named after section 529 of the Internal Revenue Code and is legally known as a qualified tuition plan. What the plans qualify for is exemption from federal taxes on earnings and withdrawals if they are used for qualified education expenses. Qualified expenses include tuition, school fees, books and supplies, school equipment (such as computers), and room and board.
Section 529 plans are typically organized through a specific state, and contributors who use their own state plans usually receive state tax benefits, as well as federal benefits. For example, contributors to 529 plans in some states may be able to deduct their donations from their own state income taxes and withdraw earnings at the state level tax-free. Section 529 plans can only be used for higher education. They were designed for college education, but up to $10,000 can be used for primary or secondary education.