529 plans are tax-advantaged investment vehicles designed to
encourage and support families and individuals looking to save money with the
intention of using it to pay for future education. 529 savings plans are named
after section 529 of the Internal Revenue Code and are sponsored on a
case-by-case basis through individual states.

529 plans are divided into two types—education savings plans and
prepaid tuition plans. Nearly every state in the U.S., as well as the District
of Columbia, offers its own plan.  While
you may open an account across state borders, there can be significant state
tax advantages and other benefits for investors who choose 529 plans in their
state of residence.

The funds in a 529 plan can be used for any eligible postsecondary
educational institution within the U.S., as well as many overseas, for
qualified expenses. These include tuition, fees, books, computer equipment and
software, and supplies for attendance. Room and board can also qualify for
students who are at least enrolled half-time. Following the Tax Cuts and Jobs
Act of 2017, K-12 public, private, and religious school tuition is now included
as a qualified expense for 529 plans. This addition allows distributions from
529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary
(regardless of the number of contributing plans) each year.


Key Benefits of a 529 Plan

Tax-Free Qualified Distributions

Beneficiaries of 529 plans can access their funds tax free in most
cases, though some states may have different laws than the federal regulations.

No Income Limits

There are no upper- or lower-income limits for contribution and
participation in 529 plans, which allows higher income families to benefit from
them as well.

Large Contribution Amounts

There are also significantly high contribution limits,
particularly compared to ESA, while the account balance limits can vary from
state to state.

Rules, Restrictions, and Traits of 529 Plans

529 education savings plan contributions can only be made in cash,
and they are generally invested in a pre-determined portfolio of stocks, bonds,
and securities. Beneficiaries of a 529 plan can be changed without any tax
consequences, as long as the new beneficiary qualifies as a sibling,
descendant, ancestor, aunt, uncle, or first cousin. 529 plans are also flexible
in that some vocational schools are also eligible for distributions to be used
as qualifying expenses.

It’s important to note that a 529 account could affect the
beneficiary’s ability to receive financial aid.

Amuni Financial, Inc. is a Broker-Dealer and Registered Investment Advisor. Member FINRA/SIPC. Please see our website for the states in which we’re registered to do business.

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