A 529 plan is a tax-advantaged account for education expenses. Earnings grow federal tax-free and withdrawals for qualified costs are also tax-free.
What it covers
Qualified expenses include tuition, fees, books, required equipment, room and board for students enrolled at least half time, and up to $10,000 per year in K–12 tuition. Student loan repayment up to a $10,000 lifetime limit also qualifies.
Benefits and flexibility
Many states offer an income tax deduction or credit for contributions. Anyone can contribute. If the beneficiary does not use the funds, you can change the beneficiary to another family member, or roll up to $35,000 over a lifetime into the beneficiary's Roth IRA, subject to rules, including that the account has been open 15 years.
Financial aid and investing
A parent-owned 529 is treated as a parent asset on the FAFSA, with a modest impact on aid. Most plans offer age-based portfolios that shift to conservative investments as college approaches. Compare fees and your state plan's tax benefit.
Try the numbers
Use our 529 College Savings Calculator to see this in practice. With its default example (Child’s age: 3; Current 529 balance: $5,000; Monthly contribution: $300), it shows projected 529 balance at 18: $99,516. Adjust the inputs to match your situation.
Key takeaways
- 529 growth and qualified withdrawals are federally tax-free.
- Unused funds can be changed to another beneficiary or partly rolled to a Roth IRA.
- Compare fees and state tax benefits.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.