529 Plan College Savings
Calculator 2026

A 529 Plan is a state-sponsored, tax-advantaged investment account under IRC §529 for qualified education expenses. Contributions grow tax-deferred federally; withdrawals for qualified education expenses are tax-free. Two types: (1) College Savings Plans (most common) — invest in mutual fund-like portfolios, returns market-based. (2) Prepaid Tuition Plans — lock in current tuition rates at specific schools (only ~10 states offer; declining popularity). Account owner controls funds (not the beneficiary). Beneficiary can be changed to another qualifying family member at any time without penalty. No federal contribution limit; states impose aggregate balance caps typically $300,000-$600,000. Most states accept enrollment regardless of residency — Utah, Nevada, New York have particularly popular plans for non-residents.

Federal tax-free withdrawal allowed for: (1) Tuition and required fees at any eligible institution (US accredited college, university, vocational school, AND many foreign schools). (2) Room and board (if enrolled at least half-time) — capped at school's published cost of attendance for that category. (3) Required books, supplies, and equipment. (4) Computers and required software (added by PATH Act 2015). (5) K-12 tuition up to $10,000 per year per beneficiary (added by TCJA 2017) at any public, private, or religious school. (6) Apprenticeship program expenses (SECURE Act 2019). (7) Up to $10,000 lifetime principal+interest on student loans of the beneficiary or beneficiary's siblings (SECURE Act 2019). State tax treatment may differ — some states limit qualified expenses to higher education only.

Contributions are NOT federally tax-deductible (state deductions vary widely). Earnings grow tax-deferred. Qualified withdrawals are 100% federally tax-free — no tax on earnings used for qualified education. Non-qualified withdrawals: the EARNINGS portion only is taxed at the beneficiary's marginal rate PLUS a 10% federal penalty (the contributions/principal portion comes out tax-free since you already paid tax on it). Penalty waived if beneficiary: (a) receives a scholarship (penalty waived on amount up to scholarship value, earnings still taxed); (b) attends US service academy; (c) dies or becomes disabled. State tax treatment varies — some states fully tax non-qualified, others mirror federal rules.

Highly state-specific. Examples 2025-26: New York $5,000 single / $10,000 MFJ (must use NY's 529); Pennsylvania $19,000 single / $38,000 MFJ on contributions to ANY 529 (rare state-agnostic deduction); Illinois $10,000 single / $20,000 MFJ; California, Florida, Texas, Tennessee, Washington — NO state income tax = no deduction available; New Hampshire, Massachusetts, Nevada, South Dakota, Wyoming — also no state income tax. State deductions typically require contributing to the in-state plan (with PA, KS, ME, AZ, MN, MT being notable exceptions allowing deduction for out-of-state plans). Some states 'recapture' the deduction if you withdraw for non-qualified expenses or roll to a different state's 529.

Yes — IRC §529(c)(2)(B) allows a special election to treat a large 529 contribution as if it were spread over 5 years for gift tax purposes. 2026 superfund limits: $95,000 single donor / $190,000 married filing jointly per beneficiary in one year (5 × annual exclusion $19,000 / $38,000). Lump sum allows immediate market exposure for long-term growth. Trade-off: if you make ANY other gifts to the beneficiary in the next 4 years, they count against your annual exclusion (which was effectively pre-used). File Form 709 (gift tax return) to make the election even though no gift tax may be due. Donor cannot make further gifts to the same beneficiary in 4 years without using lifetime exemption. Grandparents commonly use superfunding for college savings without triggering gift tax.

Effective January 1, 2024 — unused 529 funds can be rolled over to a Roth IRA for the same beneficiary. Conditions: (1) The 529 account must have been OPEN for at least 15 years. (2) Rolled funds must have been in the 529 for at least 5 years. (3) Annual rollover is capped at the Roth IRA contribution limit ($7,000 in 2026, $8,000 if 50+). (4) Lifetime cap of $35,000 per beneficiary. (5) Beneficiary must have earned income at least equal to the rollover amount. (6) Beneficiary's MAGI must be below Roth IRA phase-out limits. Strategy: parents who overfunded a 529 or whose child got significant scholarships can now redirect to retirement instead of facing 10% non-qualified withdrawal penalty. The rollover counts as 'qualified' — no federal tax or penalty.

Mechanics-based answer (not advice): Account ownership affects financial aid (FAFSA) treatment significantly. (1) Parent-owned 529: counted as parent asset on FAFSA — assessed at maximum 5.64%. Best for ongoing aid eligibility. (2) Student-owned 529 (custodial): assessed at 20% as student asset — worse for aid. (3) Grandparent-owned 529: NOT counted as student or parent asset on FAFSA (rule change 2024-25). Distributions ALSO no longer count as student income (previously assessed at 50% — significant aid reduction). This makes grandparent-owned 529s newly attractive post-2024. Custodial UGMA/UTMA 529 (variant): becomes student's at majority age — same 20% FAFSA assessment as student-owned. Multiple owners possible for same beneficiary; each plays a different aid role.

Yes, with no tax consequences if the new beneficiary is a member of the same family. Qualifying family members under IRC §529(e)(2): spouse, child, descendant, sibling, sibling's spouse, parent, parent's sibling, parent's sibling's spouse, niece/nephew, first cousin, in-laws. The current Tax Cuts and Jobs Act (TCJA 2017) treats first cousin as a qualifying member. Process: account owner contacts plan administrator and submits a beneficiary change form. No federal tax, no penalty. Useful for: redirecting unused funds from one child to another, family-wide education savings pool, even using leftover funds for parent's continuing education (e.g., a working parent going back for an MBA). Multiple beneficiary changes allowed throughout the account's life. State tax recapture may apply in some states if you've claimed deductions.

Several options to avoid the 10% non-qualified withdrawal penalty: (1) Change the beneficiary to another family member (sibling, cousin, parent for grad school, etc.) — no tax or penalty. (2) Hold the account — beneficiaries can use funds at any future age (no expiration). (3) Use up to $10,000 lifetime for student loan repayment of beneficiary or sibling. (4) Roll over up to $35,000 lifetime to Roth IRA per SECURE 2.0 (since 2024, 15-year aging requirement). (5) Use for K-12 tuition up to $10,000/yr (since TCJA 2017). (6) Apprenticeship programs. (7) Last resort: non-qualified withdrawal — earnings taxed + 10% penalty. Scholarship exception waives the penalty on amount up to scholarship value (earnings still taxed). Most families end up using funds productively across the years given the flexibility.

Coverdell ESA (Education Savings Account, §530): $2,000 annual contribution limit (much smaller than 529), income-phased eligibility (single $110k MAGI / MFJ $220k), more investment flexibility (self-directed). Coverdell expires at age 30 (forced distribution); 529 has no age limit. UGMA/UTMA (custodial accounts under Uniform Gifts/Transfers to Minors Act): no tax advantage for college specifically, becomes student's property at majority (18-21), counts as student asset (20% on FAFSA), unrestricted use after majority. For pure college savings 529 wins on contribution limits and tax benefits. UGMA/UTMA fits when funds may be for non-education purposes. Coverdell shines for self-directed K-12 + college small balances. Many families use 529 as primary + Coverdell for tactical investment choices.