Retirement & Savings

What Is a 529 Plan?

A 529 plan is a US tax-advantaged savings account designed for education expenses. Investment growth is tax-deferred, and withdrawals are free of federal income tax when used for qualified education costs such as tuition, fees, books, and room and board. Plans are sponsored by states.

How a 529 Plan Works

There is no federal annual contribution limit, but each state sets a lifetime maximum per beneficiary, and contributions count as gifts for gift tax purposes. Many states offer a state income tax deduction or credit for contributions to their own plan.

Non-Qualified Withdrawals

Withdrawals not used for qualified expenses are subject to income tax and a 10% additional tax on the earnings portion, with some exceptions.

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🎓 529 College Savings Plan Calculator See how your monthly contributions could grow, tax-free, for college. Calculate → 🎯 Savings Goal Calculator Find out how much to save each month to hit your target. Calculate →

🔗 Related Terms

Compound Interest Emergency Fund Sinking Fund

More Retirement & Savings Terms

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.