529 Plans Assist Families

A 529 plan is an investment vehicle that is designed to help families pay for college classes or post secondary training. Although contributions to a 529 plan are not tax deductible, these plans offer other tax advantages and are a part of the Section 529 of the IRS Code. All fifty states in the US and the District of Columbia sponsor at least one type of 529 plan.

The ARRA has added computer technology to the list of college expenses that can be paid for with a 529 plan. This means that students who are studying online can participate in the program beginning this year.

There are many advantages to using the 529 plans as the earnings are not subjected to federal tax when used to pay for eligible college expenses. These earnings are normally not subjected to state tax and some states offer other incentives to in-state participants. There are no income restrictions on the 529 plans and contributions are only limited by the education expenses.

There are two types of 529 plans-prepaid tuition and savings plans. The prepaid tuition plans allows families to pay for future tuition in current dollars and prices. The savings plans allows a family to accumulate funds in a tax advantageous way for future tuition costs.

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