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Definition: 529 Plan.
529 plans are tax-advantaged accounts that
are used to help pay for qualified educational
expenses.
What you may already know:
The big advantage of a 529 plan is that “qualified” withdrawals from the account are usually federal and state income-tax free.
The plan is a great way to help out with everything from college tuition, to room and board, to computer purchases, and lots more.
Want to help your child or grandchild by helping them get through college without going broke? A 529 plan is a great way to go.
What you may NOT know:
Not all 529 withdrawals are tax-free “qualified” accounts.
If withdraws are not qualified, you could wind up with serious tax problems you may not be aware of…
- Non-qualified withdrawals are taxed as ordinary income.
- You’re subject to a 10% early-withdrawal penalty tax!
Six facts you should know
about avoiding 529 withdrawal problems.
Fact #1: 529 college savings account withdrawals can be very tricky
Fact #2: Watch out for withdrawals from 529 accounts funded with custodial account money
Fact #3: The IRS knows about withdrawals
Fact #4: Withdrawals may be taxable even in years when substantial college costs are incurred
Fact #5: When you keep a withdrawal, there are serious tax consequences
Fact #6: Withdrawals not used for education can be hit with a 10% penalty tax
To get the full story about what a 529 plan has to offer you and the soon to graduate youngster…