For example, depending on your state, you might be eligible for a state income tax credit of 20% of contributions to a 529 account, up to a certain amount per year. With a 529 plan, you put away money that grows tax-free, as long as you use it on education. These types of savings accounts are also very flexible.
Just because a student has a 529 account set up in Kansas, doesn’t mean the assets cannot be used to attend a school in California or Texas, as long as the institution is eligible under the specific 529 rules.
Many plans allow for over $500,000 per beneficiary to be held in a 529 account, with few income or age restrictions, but it’s important to know your state’s limits. Michigan, for example, caps contribution limits at $500,000 whereas Georgia maxes out at $235,000. But your balance can still grow past that amount through investment returns without limit.
Another great benefit of a 529 is the donor retains control of the account and makes the decision for when withdrawals are made and for what reason.
It’s important to consult an advisor or a 529 plan manager with specific questions regarding how each state’s plan works.