What is a 529 plan? A 529 plan is an investment account that offers tax benefits when used to pay for qualified educational expenses. You can use a 529 plan to pay for college tuition, books, room & board during college, and K-12 tuition.
There are many benefits to having an Iowa 529 College Advantage Plan. Just a few of the benefits are:
- Earnings in a 529 plan grow income tax-free and will not be taxed when the money is taken out to pay for educational expenses as listed above.
- Contributions to an Iowa 529 plan of up to $3,474 for 2021 per beneficiary by an individual, and up to $6,948 per beneficiary by married taxpayers filing jointly who each make their own contributions, are deductible in computing Iowa taxable income.
- With few exceptions, the named beneficiary has no legal rights to the funds in a 529 account, so you can assure the money will be used for its intended purpose. This differs from custodial accounts, where the child takes control of the assets once he or she reaches legal age.
- A 529 plan is a very hands-off way to save for education. Most plans allow you to ‘set it and forget it’ with automatic investments that link to your bank account or payroll deduction plans.
This type of savings is a great, hassle free way to plan and save for your child’s or grandchild’s future education.