Give It the Old College Try with a 529 Plan

摘要

If you want your child to attend college, re-member this number 529. Thanks to the recent tax legislation, state-sponsored college savings plans—known as 529 plans for the section of the tax code that created them—are, for most people, the best way to save for college. The reason is simple: no federal taxes. Starting in January, the U.S. government will allow you to tap the money accumulated in a 529 plan tax-free. This is a big change from the past when earnings were taxed at the student's income-tax rate upon withdrawal. Several states have waived their own taxes on these accounts, and more—though not all—are expected to follow. One hitch: The money must be used for higher education or you will pay taxes and a penalty, typically 10% of earnings.