A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. Contributions are treated as completed gifts and generally with a $14,000 annual exclusion. Qualified expenses include tuition, fees, books, supplies, equipment, special needs; room and board for minimum half-time students.
Deductions for a 529 plan are non-deductible on your Federal income taxes and are subject to income tax and a 10% penalty if used for non-qualifying expenses. Your investments are limited to the strategies developed by the program in which you enroll.
After-tax dollars put into the plan allowed to grow tax-free and used for education as you see fit, no limitations! These plans allow tax-free loans for any purpose and do not have the same limits on contributions. Money that isn’t used for college, can be used later for your retirement.