529 college savings plans

A 529 college savings plan offers unique tax advantages for people investing money for college.  By law, all 529 college savings plans must be state sponsored, but you don’t have to be a resident of a particular state to invest in that state's plan (but there may be income tax advantages available only to state residents for a particular plan). There’s no income limit to participate in a 529 college savings plan, and you can open one on behalf of any beneficiary — even yourself.

529 College Savings Plan features can differ from state to state, like contribution limits, fees, in-state tax advantages, and available investment options.

In general, any U.S. citizen or resident alien with a Social Security Number or federal Taxpayer Identification Number can open and contribute to a 529 College Savings Plan account on behalf of a beneficiary. You can even open an account for yourself.

Any U.S. citizen or resident alien, including the account owner, can be the beneficiary. The beneficiary must have a valid Social Security Number or Taxpayer Identification Number.

Yes, with most plans you can change the beneficiary or transfer a portion of your investment to a different beneficiary, provided the new beneficiary is an eligible "member of the family" of the previous beneficiary.

A "member of the family" is a person related to the account beneficiary, including:

• a child or a descendant of a child
• a brother, sister, stepbrother or stepsister
• the father or mother, or an ancestor of either
• a stepfather or stepmother
• a son or daughter of a brother or sister
• a brother or sister of the father or mother
• a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
• the spouse of the beneficiary or spouse of any of the above family members
• a first cousin of the beneficiary

In these cases, “a child” includes a legally adopted child and a stepson or stepdaughter. A “brother or sister” includes a half-brother or half-sister.

The maximum amount you can invest is determined by the specific state plan you choose and varies from state to state. For many plans, the limit is $300,000 or more for all accounts in the plan for a beneficiary.

If your account beneficiary doesn't attend college, the owner, may name another account beneficiary (who must be a family member of the beneficiary that is being replaced). Otherwise, if you withdraw the funds for a purpose other than to pay for qualified higher education, then you would have to pay federal income tax on the earnings portion of the withdrawal, plus face an additional 10% federal tax penalty. There may also be state tax consequences. We recommend you talk to a qualified tax advisor.

If your beneficiary receives a scholarship, you can withdraw the funds from your account up to the amount of the scholarship without penalty or additional tax. The earnings portion of the amount withdrawn will be subject to the additional 10% federal tax to the extent the amount withdrawn exceeds the amount of the scholarship . We recommend you talk to a qualified tax advisor.

If money from a college savings plan account is used for nonqualified purposes, you could not only pay federal and state income taxes on the earnings portion of that money, but also face an additional federal 10% tax. There could also be state tax consequences.