529 plans are designed to encourage saving for college.
529 plans are sponsored by states, state agencies, and educational institutions, and are authorized by Section 529 of the Internal Revenue Code.
my529 is a 529 plan established and sponsored by the State of Utah.
Benefits of 529 plans
529 plans provide important advantages to account owners and beneficiaries.
- Earnings aren’t subject to federal or state tax when used for qualified higher education expenses, such as:
- Tuition and mandatory fees.
- Computers, peripheral equipment, educational software, and internet access.
- Books, supplies, and required equipment.
- Room and board for students enrolled at least half-time.
- K-12 tuition expenses at public, private, or religious schools.
- Payments on qualified education loans. This includes amounts paid—as principal or interest—on any qualified education loan of the beneficiary, or a sibling of the designated beneficiary. Withdrawals for loan repayments are limited to a total of $10,000 from all 529 accounts. Distributions to a sibling also have a $10,000 limit. However, the account owner cannot use 529 funds to repay a qualified loan and then use those same 529 funds to claim a tax deduction for student loan interest.
- Costs for registered apprenticeships, including fees, books, supplies, and equipment required for participation. To qualify, apprenticeship programs must be registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act.
- Many states offer tax credits or deductions on contributions.
- Enrollment is open all year.
- Account owners—not the beneficiary—control their accounts.
- There are no age, income, or residency restrictions.
- Plans typically offer a range of investment options.
- Withdrawals can be used at any eligible higher education institution.
- 529 funds can be used for college, university, post-secondary vocational or technical school, or graduate school.
- Funds can be used for tuition at K-12 schools.
- Saving is less costly than borrowing.
“A low- and moderate-income child who has school savings of $1 to $499 … is about four times more likely to graduate from college.”
Assets and Education Initiative. (2013). Building Expectations, Delivering Results: Asset-Based Financial Aid and the Future of Higher Education. In W. Elliott (Ed.), Biannual report on the assets and education field. Lawrence, KS: Assets and Education Initiative (AEDI).