Section 529 College Savings Plan

Recent tax law changes have created provisions for tax-advantaged college savings plans.  The new legislation was codified under section 529 of the Internal Revenue Code.  The following are the highlights of the 529 College Savings Plan:

 -A 529 savings account can be set up for the benefit of a beneficiary such as a child, grandchild, niece or nephew;

 -While contributions to the 529 Plan are not deductible, Earnings and withdrawals for qualified higher education expenses are free from federal taxation;

 -Contributions can be made for up to $11,000 ($22,000 for married couples) for each beneficiary.  Under a special election, a total of $55,000 ($110,000 for married couples) can be contributed at one time by accelerating 5 years’ worth of investments;

 -Withdrawals for expenses other than qualified higher education are subject to a 10% IRS penalty on earnings;

 -There are no age or income limitations for the beneficiary or the contributing party.


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