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529 College Savings Plans from Financial Architects 
Learn more about 529 plans to help fund college educations

College Savings Plans If you find yourself intimidated by the ever-rising price of higher education, then a 529 college savings plan might be a key component in saving for a college education. A 529 college savings plan is a tax-advantaged way to save for college and pay for higher education expenses. Unlike some other savings vehicles, a 529 college savings plan may allow you to make sizeable contributions. The funds may generally be used for any qualified college or higher education expense, including tuition, room, board, fees, books, supplies, and equipment. Tax benefits may be subject to certain restrictions.

Money in a 529 college savings plan grows tax deferred. And you may be able to withdraw the money without having to pay federal and state income taxes—depending on the plan and where you live—as long as it’s used to pay for qualified, higher-education expenses1. If the money from 529 college savings plans is used for other purposes, the earnings portion of a withdrawal is subject to ordinary federal income tax, an additional 10% federal tax, and any applicable state income taxes. 529 college savings plans may also affect a student's eligibility for financial aid.

Gift Tax and Estate Tax Benefits

529 plans are partially exempt from the gift tax. You can contribute up to $13,000 ($26,000 for married couples) annually per beneficiary, or up to $65,000 ($130,000 for married couples) over a five-year period, without triggering the gift tax2.

Keep in mind that your gifts are excluded from your estate, so investing in a 529 Plan can be a smart strategy to reduce your estate tax.

Scholarship Withdrawals

Funds may be withdrawn without penalty if the beneficiary receives a scholarship (withdrawals can be made up to the scholarship amount), or in the event of the death or disability of the beneficiary. Ordinary federal and state income taxes would be owed on any investment earnings included in gross income.

 

1A federal 10% penalty may be imposed on the earnings portion of a non-qualified withdrawal in addition to ordinary income tax.

2If the Account Owner utilizes the special five-year lump sum exclusion and dies within five years of the funding date, the portion of the contribution allocable to the years remaining in the five-year period (beginning with the year after the Account Owner's death) would be included in the account owner's estate for Federal estate tax purposes. Clients should consult their tax advisor.