What is a 529 College Savings Accounts?
Many people choose to set money aside for a child or grandchild. A 529 account is a special kind of investment account that you can use to pay for a wide range of education expenses. Your savings in the plan will grow tax-deferred, and withdrawals are tax-free as long as they go to qualified expenses.
There are two types of 529 plans:
With 529 Savings Plans you invest your after-tax contributions in investments like mutual funds, and then use that plan account to pay for qualified expenses for colleges and universities, as well as private, public or religious elementary or secondary tuition expenses for K-12 students. They’re the most common kind of 529 plan.
Prepaid Tuition Plans allow you to prepay for an in-state public school so you can lock in tuition rates for a student who might not actually attend the school for a few years.
529 plans can be used to pay for qualified educational expenses like tuition and fees, books, computers, as well as room and board. The IRS has also expanded qualified expenses to include K-12 tuition and student loan repayments too.
Every state offers at least one 529 plan option. You don’t have to invest in your state’s 529 plan, but it might offer extra tax savings if you do. There’s no limit to how much you can invest in a 529 plan every year, but many states cap the total amount you can contribute over a lifetime from $235,000 to $525,000.
If you are interested in opening a 529 account for someone in your life, feel free to reach out to us at 716-445-7465 or email info@buffalofirstllc.com.
