Three Things to Know About 529 Accounts

HOW TO HELP FRIENDS AND FAMILY PAY FOR COLLEGE AND OTHER EDUCATION EXPENSES

1. A 529 ACCOUNT CAN BE USED TO PAY FOR COLLEGE AND OTHER QUALIFIED EDUCATION EXPENSES.

Section 529 of the Internal Revenue Code allows individuals to save money in a tax-free investment account if the funds are to be used for qualified education expenses. These savings accounts are called "529 Accounts." It used to be that the funds could only be used to pay for college. However, funds can now be used to pay up to a total of $10,000 of tuition each year at an elementary or secondary (k-12) public, private, or religious school of the beneficiary’s choosing.

2. ANYONE CAN CONTRIBUTE TO A 529 ACCOUNT.

As long as the contribution is less than $18,000 per year (in 2024), anyone can contribute to someone else's 529 account without being subject to the gift tax. This means you don't have to be directly related to an individual to contribute to their 529 account and help them fund their education.

3. THE FUNDS GROW TAX-FREE, AND WITHDRAWALS AREN'T TAXED IF USED FOR QUALIFIED EDUCATION EXPENSES.

Although you don't get a tax deduction for investing in a 529 account, the funds invested in the account grow tax-free. Also, neither you nor the beneficiary need to pay taxes when the funds are withdrawn, as long as the funds are used for qualified education expenses. This includes tuition, fees, books, and supplies at a qualified education institution.

PRO TIP: The best way to set up or learn more about 529 accounts is to talk with a qualified financial planner. Contact me for a referral!

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PLEASE NOTE: THIS ARTICLE IS?PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 5834.