Test Your Knowledge of 529 Plans

529 education savings plans are a tax-smart way to save for college and other levels of education. Here’s an opportunity to see how much you know about these popular plans.

True or False: You can open a 529 account for anyone.

True. You can open an account for anyone – your child, grandchild, other relative, friend, yourself – even if someone else has already opened an account for that beneficiary.

True or False: You must choose your state’s 529 plan.

False. You can choose nearly any state’s 529 plan. However, your state’s plan may offer perks for state residents so it is a good idea to consider it along with other plans.

True or False: Investment earnings grow tax-free and withdrawals for qualified education expenses are free from federal taxes.

True. That’s what makes 529 plans so attractive. Investment earnings grow free from taxes and withdrawals for qualified education expenses, such as college tuition, are free from federal taxes and perhaps state taxes also.

True or False: You can use 529 savings for grades K-12 tuition.

True. Up to $10,000 per year can be withdrawn free from federal taxes for grades K-12 tuition. State taxes may apply in some states. Check first.

True or False: You can use 529 savings to repay student loans.

True. You can withdraw up to $10,000 each for the beneficiary and his or her siblings to repay their qualified student loans. Although the withdrawals will be free from federal taxes, state taxes may apply in some states. Check first.

Please consult with us for advice if you would like to help your child or other loved one save for their education. With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Our approach is to provide clarity and calm amidst the chaos. Where there is uncertainty, we look for facts. We call our approach evidence-based investing. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success.

Article published in May 2021 edition of Eye on Money. If you would like to be added to our mail list please email [email protected].