Fun Facts about 529 Plans

by Matt Ridenhour, CRPS®, MBA

529 plans are designed to help us save for future college expenses. South Carolina residents who make contributions may also be eligible for a state income tax deduction. Anyone, no matter what state you live in, can use funds from a 529 account to pay for qualified higher education expenses.

Qualified withdrawals aren’t subject to state or federal taxes. Did you know that the 529 beneficiary can use the funds to pay for higher education expenses at eligible institutions in all 50 states? 529 accounts can also help cover higher education expenses at over 350 international institutions. You can find a list of all 529 Eligible educational institutions at savingforcollege.com and fafsa.ed.gov. What if little Johnny decides to join a rock band after graduating from high school and doesn’t go to college? As the account owner, you maintain control of the assets.

In the event your child doesn’t attend college you can change the beneficiary to another family member, leave the assets in the existing account for future use, or make a nonqualified withdrawal and buy a new Corvette. If you decide to buy the Corvette, only the earnings from a nonqualified withdrawal are subject to a 10% penalty, along with federal and state taxes at the account owner’s current tax rate. There are many more reasons to consider opening a 529 account.

Investing involves risk including loss of principal. Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

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