Saving for college the tax free way with a 529 plan.

Saving for college can be a challenge with a traditional savings or investment account since a significant portion of the earnings on the account is eaten up in taxes on the investment income. A 529 Plan (known officially as a Qualified Tuition Program), allows you to put money aside and generate tax-free earnings for future education.

This video goes over what a 529 Plan is, how it works, and pitfalls to avoid to get the maximum benefit out of the plan.

SECURE 2.0 UPDATE: To be able to roll unused 529 funds into a Roth IRA, the 529 account must be (a) opened for at least 15 years, and (b) the rollover is limited to $35,000.

0:00 Introduction
0:43 What are 529 Plans?
1:43 How 529 Plans work
3:52 529 Plan distributions
5:44 Plan strategies
6:59 Conclusion

If you'd like a refresher as to how a Roth IRA works, click here:    • A guide to Roth IRAs  

To learn more about the American Opportunity Credit, click here:    • The American Opportunity Credit (or t...  

Resources and additional information:

IRS Publication 970: "Tax Benefits for Education": https://www.irs.gov/pub/irs-pdf/p970.pdf

IRS Form 1099Q: "Payments From Qualified Education Programs": https://www.irs.gov/pub/irs-pdf/f1099...

finaid.org: "Section 529 Plans": https://www.finaid.org/savings/529plans/

finaid.org: "State Section 529 Deductions": https://www.finaid.org/savings/state5...

The Tax Geek on the Site Formerly Known as Twitter: @taxgeekusa

The Tax Geek on Reddit: www.reddit.com/r/askataxgeek

Image and footage credits:

Storyblocks.com
Wikimedia Commons

The images of the "owner" and her "beneficiaries" were generated by thispersondoesnotexist.com (stability.ai) and any resemblance between these images and any person, living or dead, is coincidental and not intentional.

NO OTHER ARTIFICIAL INTELLIGENCE WAS USED TO WRITE, EDIT, ANIMATE, VOICE, OR EDIT THIS VIDEO

Intro Music: "Bluesy Vibes" - Doug Maxwell - YouTube Creator Music

Outro Music: "Modern Attempt" - Track Tribe under license from YouTube Creator Music

DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.