College Savings Planning

529 College Savings Plans At-a-Glance

What is a 529 plan? It is a program that:
  • Is designed to help families invest for higher education
  • Offers state and federal tax advantages
  • Gives the account owner control over how and when the assets are used
  • Is generally sponsored by a state (Learning Quest is sponsored by Kansas)
What are the tax benefits? There are several tax benefits:
  • Earnings grow tax-deferred from federal and state taxes1
  • Withdrawals for qualified education expenses are tax free1, 2
  • There is no federal gift tax on contributions per beneficiary up to $70,000 ($140,000 for spousal gifts) in a single year; generally, contributions to an account are removed from your taxable estate.
  • Some states offer tax benefits; Kansas taxpayers may invest in any state-sponsored 529 plan and receive a Kansas adjusted gross income deduction for their contributions. This deduction applies to contributions of up to $3,000 per beneficiary, per year ($6,000 if married, filing jointly).
Where can 529 plan assets be used? Any eligible higher education institution in the U.S. and abroad2:
  • 2- or 4-year public or private colleges and universities
  • Graduate schools
  • Vocational/technical schools
What can 529 assets be used for? Qualified withdrawals include:
  • Tuition
  • Required fees, Computers, books, and equipment
  • Certain room and board costs
Who can open an account? Almost anyone can open a 529 plan account:
  • There is no income level and no maximum age limit
  • Any U.S. citizen or resident alien, 18 or older, with a permanent U.S. address
  • Parents, grandparents, other family members, or friends
  • An adult learner for his or her own retraining or ongoing education
Who controls the assets and withdrawals? There is generally an account owner and a beneficiary (the student for whom the account is set up); the account owner maintains control of the account, including:
  • Making withdrawals
  • Making any changes to the beneficiary or the investment
  • Choosing where and when the assets are used
How does a 529 plan account work? The account owner invests in the portfolio(s) of their choice that are offered by the plan, selecting investments that are appropriate for their risk tolerance and the amount of time that they have until the student will be attending college.

The availability of tax or other benefits may be conditioned on meeting certain requirements.

1 Check with your tax advisor for your state's rules.
2 Earnings on non-qualified withdrawals are subject to federal and state income taxes and a 10% federal penalty tax.