DIY Money | Personal Finance, Budgeting, Debt, Savings, Investing Using a 529
Jun 13, 2025
Discover the ins and outs of funding education with a 529 plan. The hosts tackle tax-saving strategies and the benefits of this account compared to custodial options. There are discussions about navigating recent regulatory changes and how they impact your savings. You'll also hear practical tips on avoiding tax penalties when transitioning funds. This engaging conversation will help families make informed decisions about managing educational expenses.
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No Immediate 529 Tax Deductions
- There is no direct tax deduction for contributions to a 529 plan unlike IRAs or 401(k)s; the tax advantage is tax-free growth and distributions.
- Use savings strategically since contributions don't reduce your taxable income, but account growth is tax-exempt if used properly.
529 Plan Tax Advantages
- 529 plans offer tax-free growth if used for educational expenses but don't provide upfront tax deductions like IRAs or 401(k)s.
- Money grows tax-free and withdrawals for qualified expenses avoid capital gains and income taxes, making growth tax-exempt.
Maximize 529 Benefits
- Before choosing a 529, decide if it fits your education savings goals and explore alternatives like custodial accounts.
- Use 529 funds to cover all qualified expenses including tuition, dual credits, housing, and books to maximize tax benefits.