529 College Savings Plan
A state-sponsored tax-advantaged investment account for education expenses, with tax-free growth and tax-free withdrawals for qualified education costs.
Detailed Explanation
529 contributions are not federally deductible but most states offer a state income tax deduction or credit (subject to caps and in-state plan requirements in some states). Withdrawals for qualified education expenses (tuition, fees, books, room and board, and up to $10,000 per year of K-12 tuition) are tax-free. SECURE 2.0 added the option to roll up to $35,000 lifetime from a 529 into a Roth IRA for the beneficiary, subject to the 15-year account age requirement and annual Roth contribution limits.
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Learn about Tax Planning & StrategyRelated Terms
SECURE 2.0 Act
A 2022 federal law amending retirement account rules, including RMD age changes, expanded catch-up contributions, automatic 401(k) enrollment, and new employer matching for student loan payments.
Backdoor Roth IRA
A two-step strategy of contributing to a non-deductible traditional IRA and converting it to Roth, used by high-income earners who exceed direct Roth IRA contribution limits.
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