A 529 plan is to encourage savings for future college cost. It is a plan operated by the state which provides tax advantage and other incentives to make the saving easier for college higher studies. The tuition fees are touching the sky and the price of books, board and rooms are increasing too. The advantage of the 529 plan is earning are not subject to federal tax or state tax. The legal name is “Qualified tuition program” and 529 is the section of the internal revenue code.
529 is a very popular plan for your kid to make sure the higher education fees will be covered when your child starts his/ her college.

Facts:

1. The plan was introduced in 1996.
2. The plan is originated by the state and not by the federal government.
3. Prepaid plans and saving plans are the 2 types of plan.
4. 18years or older can open the account.
5. The tax free distribution is not restricted towards the fee, you can purchase the required technology, books and other supplies and materials required for the purpose of education.
6. The money contributed is invested in mutual funds.
7. There is a contribution limit which should not exceed $14000 in a year.
8. The beneficiary can be changed to another member of the family.
9. Every plan carried various fees
10. Each state has its own set of 529 plans regulations.
11. There can be only one beneficiary
12. There are no income restrictions on the contribution.
13. This plan can be crashed by the stock market.
14. The money accumulated in 529 can be transferred to another student if the beneficiary got a scholarship or has another plan.
15. You can cash out your saving binds in 529 plans.
16. It is a parental asset and it’s controlled by the parents.
17. If you are carefree than you may owe tax.
18. The age and enrolment has restrictions.
19. The asset or the amount owned by the parents under this plan it is not reported as income.
20. The beneficiary has the legal rights in the money.
21. Utilisation of the funds is in the hands of the beneficiary in completion of the age 18 to 21 depending upon the state laws and regulations.
22. The fund can be used in any state as per the choice of the beneficiary/student.
23. The funds used for other purpose instead the education, 10% penalty tax is incurred.
24. There is no penalty in case the beneficiary is dead or disabled.
25. The tax has to be repaid in case of state income tax deduction on contributions.