As mentioned, no federal tax deductions may be taken for contributions made to such accounts, however you may qualify for a deduction on your state income tax return depending on your residency as 34 states currently offer a least a partial deduction. Furthermore, if your child later qualifies for a full-ride scholarship or financial aid package you may transfer the plan to another child or go back to school and use the funds for your own college costs.
Just keep in mind, if the funds are later used for non-qualified expenses, the earnings will be taxed and you’ll be hit with a 10% penalty. If you have any questions regarding 529 plans, please don’t hesitate to contact our office.
Stephen Osborne, CPA
Certified Public Accountant