Why a 529 Plan

Benefits of a 529 plan

Availability Anyone can contribute to the plan, the beneficiary can be any age and live in any state, and you can participate in the plan regardless of your income level. Anyone can open a 529 plan, regardless of income level.
Tax benefits Earnings grow tax deferred and your qualified withdrawals are tax-free from federal taxes and may also be free from state taxes.1
Gift and estate tax advantages Contribute up to $15,000 per beneficiary annually ($30,000 for couples filing jointly) with no gift tax-consequence, or take advantage of a $75,000 contribution ($150,000 for married couples, filing jointly) that can be treated as if it were made over a five-year period.2
Withdrawals Use at any eligible two- or four-year college, vocational/technical school, or graduate school around the country. Starting in 2018, in accordance with the Tax Cuts and Jobs Act of 2017, state-sponsored 529 plans can also be used for tuition in connection with K-12 enrollment or attendance at an elementary or secondary public, private or religious elementary or secondary school. There is a $10,000 a year per student limitation for K-12 Qualified Expenses as opposed to college Qualified Expenses that have no annual distribution limit.

Important Tax Legislation Information

1 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements, and certain withdrawals are subject to federal, state and local taxes. None of the State of Rhode Island, its agencies, Invesco Distributors, Inc., Ascensus College Savings Recordkeeping Services, LLC, nor any of their applicable affiliates provide legal or tax advice. This information is provided for general educational purposes only and is not to be considered legal or tax advice. Investors should consult with their legal or tax advisors for personalized assistance, including information regarding any specific state law requirements.

2 If the contributor dies during the five-year period, a prorated amount will revert back to the contributor's taxable estate.

529 plans for investors

Benefits of 529 plans for investors

  • Earnings grow tax deferred and your qualified withdrawals are tax-free from federal taxes and may also be free from state taxes.1
  • The account owner maintains control of the assets and decides when and where they are used.
  • An automatic investment option (AIP) is available — small monthly contributions can add up over time.
  • Any US citizen or resident alien — including grandparents, friends, and family members — can open an account and/or contribute.
  • 529 college savings plans can help with estate planning, given their high contribution limits and tax benefits.
  • There's no federal gift tax on contributions you make up to $15,000 per year if you're a single filer, or $30,000 if you're a married couple.2
  • There's no federal gift tax on contributions up to $15,000 per year for single filers, or $30,000 for filers who are married, filing jointly. 2
  • You can also accelerate your gifting. A lump sum gift of $75,000 if you're a single filer, or $150,000 if you're married, can be pro-rated over five years with the federal gift tax exclusion.2
  • Accelerate gifting. A lump sum gift of $75,000 for single filers ($150,00 if married, filing jointly) can be pro-rated over five years with the federal gift tax exclusion.2

1 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements, and certain withdrawals are subject to federal, state and local taxes. None of the State of Rhode Island, its agencies, Invesco Distributors, Inc., Ascensus College Savings Recordkeeping Services, LLC, nor any of their applicable affiliates provide legal or tax advice. This information is provided for general educational purposes only and is not to be considered legal or tax advice. Investors should consult with their legal or tax advisors for personalized assistance, including information regarding any specific state law requirements.

2 Source: irs.gov, Frequently asked questions on gift taxes

Compare 529 plans versus other college savings plans.

529 plans for families

Benefits of 529 plans for families

  • Assets can be used at any eligible college, university, or institution of higher education, including vocational schools.
  • Since 529 plans have no age limit, this is a tax-advantaged savings option for millennials looking to further their own education or to fund their future children's education.
  • If a child decides not to attend college or earns a scholarship, the money can be redirected to another family member simply by changing the beneficiary.1
  • Ugift®. Learn more about Ugift®.
  • Upromise®. Learn more about Upromise®.

1 For beneficiary changes to occur without federal or state income tax consequences, the new beneficiary must be a family member of the current beneficiary. Please see the Program Description for a definition of "Member of the Family."

Learn more about estate planning.

A college education can offer lifelong benefits

Source: Bureau of Labor Statistics. Earnings and unemployment rates by educational attainment, 2015. March 2016

College graduates could earn $1 million more than high school graduates over their lifetime.

Source: The Economic Values of College Majors, Georgetown University Center of Education and the Workforce. McCourt school of Public Policy. Anthony P. Carnevale, Ban Cheah and Andrew R. Hanson, Executive Summary, 2015

Compare 529 plans versus other college savings plans.