No statement or example in this book should be considered a specific recommendation for your personal situation. Investing and tax strategies each carry significant risks. Examples herein may not apply to your situation. Please consult your estate attorney, tax advisor, or financial advisor for personal advice.
The rules in this chapter
- 1In which state plan should I get an account?Morningstar 529 plan ratings: Morningstar 529 Ratings: The Best Plans of 2025
- 2Is a Tax Deduction or Credit better for contributions?Depositing $5,000 per year will have variable results, depending on the state plan.
- 3Understanding qualified tax-free growth–a major benefit of 529 accounts.Money invested in 529 plans grows federal and state tax-deferred, and withdrawals are not subject to federal capital gains taxes when used for qualified expenses.
- 4There is a high maximum amount allowed in 529 accounts.The maximum allowed per beneficiary amount–all accounts for a person added together–varies by state plan and adjusts as legislatures see fit (see Appendix 1 for a link to each state program description).
- 5Contribution deadlines correspond to the current calendar/tax year.Deadlines for receiving deposits are adjusted each year towards the end of December.
- 6Account Rollovers are allowed.Internal Revenue Service (IRS) rules allow funds to be rolled over from one 529 plan to another 529 plan once every 12 months for the same beneficiary.
- 7Receiving DistributionsFunds can transfer out of accounts via mailed check, ACH, or wire.
- 8For any non-qualified disbursement, any taxes or fees are ONLY on the earnings portion.Original contribution amounts always come out totally tax-free.
- 9Tax penalties on earnings are waived in some situations.Tax penalties of 10% on earnings are waived (but still federally and likely state taxed on interest income) if: