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A tax-advantaged account specifically for saving for education expenses.
Why It Matters
If you're saving for a kid's college, a 529 is almost always the best vehicle. Your money grows tax-free, and withdrawals for education are tax-free too. Some states give you a tax deduction for contributions. The catch: if you use the money for non-education expenses, you'll pay taxes plus a 10% penalty on the gains.
Key Points
- Tax-free growth and withdrawals for qualified education expenses
- Can be used for K-12 tuition (up to $10k/year) and college
- Unused funds can be transferred to another family member or rolled to a Roth IRA (new 2024 rule)
Related Terms
Common Questions
A tax-advantaged account specifically for saving for education expenses. If you're saving for a kid's college, a 529 is almost always the best vehicle. Your money grows tax-free, and withdrawals for education are tax-free too.
If you're saving for a kid's college, a 529 is almost always the best vehicle. Your money grows tax-free, and withdrawals for education are tax-free too. Some states give you a tax deduction for contributions. The catch: if you use the money for non-education expenses, you'll pay taxes plus a 10% penalty on the gains.
Tax-free growth and withdrawals for qualified education expenses
Can be used for K-12 tuition (up to $10k/year) and college
Unused funds can be transferred to another family member or rolled to a Roth IRA (new 2024 rule)