October 14, 2016
Save for college and enjoy some tax breaks too.
Formally known as a qualified tuition program or QTP, a 529 plan is a tax-advantaged way to save money for college. The “529” refers to the section of the IRS tax code that authorized the plans back in 1996.
While you don’t get a federal income-tax deduction for your contributions to the plan, they may be deductible on your state tax return if you invest in the plan run by the state you live in.
What’s more, the earnings on your account will not be taxed by the federal government, or by many states, as long as you use the money to pay qualified educational expenses. Those generally include tuition, mandatory fees, room and board, and required books.