A Publication of WTVP

According to The College Board, a not-for-profit educational association, for 2003-2004, average costs for state universities totaled $4,656, an increase of 14.1 percent, and $27,410, an increase of 6 percent, for private universities. For graduate or professional schools, the costs really skyrocket. If these figures are unsettling, this number might be a remedy: 529.

Attractive Tax Benefits

A 529 college savings plan lets you contribute substantial amounts to a tax-advantaged account to pay for college costs. The maximum varies by state, often in excess of $250,000.

Withdrawals from a 529 plan are free from federal income taxes, and, in some cases, state income taxes, when used to pay for qualified higher education expenses like tuition, books, fees, room, and board. If used for other purposes, the earnings portion of the withdrawal is taxable as ordinary income and subject to a 10 percent IRS penalty unless the beneficiary dies, becomes disabled, or receives a scholarship. Unless Congress renews or extends the current tax provision, 529 plan withdrawals will become federally taxable after 2010, but earnings would still accumulate tax-deferred until withdrawn.

Ample Flexibility

You can usually start funding a 529 plan with as little as $30 a month. 529 plan accounts may be opened for the benefit of a relative, a friend, or even yourself. You may also change beneficiaries any time, provided the new one is a family member of the previous one, as defined in Internal Revenue Code Section 529. You can now even make changes to the investment allocation once per calendar year. IBI