![]() ![]() Most people who open a 529 are parents saving for their children’s education. When you open a 529, you have the option of investing the money, like you would in a retirement account, or using it as an FDIC-insured savings account. For example, Indiana residents who contribute to the state’s CollegeChoice 529 Savings Plan are eligible for a state income tax credit on 20% of their annual contributions up to $1,000. If your state offers a tax deduction or credit, you should contribute enough to get the full tax benefit. The amount varies depending on the state, but ranges from $200,000 to $500,000 per beneficiary. Instead, there is an aggregate limit for all contributions made to the plan. Unlike with retirement plans, there’s no annual limit for 529 contributions. You can change contributions at any point with no penalty. If your income or expenses fluctuate every month, you may prefer making manual contributions. Most 529 plans let you create automatic recurring contributions that withdraw money directly from your bank account. You also can contact the college directly and ask if it is 529-eligible. ![]() Department of Education publishes a list of federal school codes. To check your graduate program’s eligibility, you’ll need to verify that it has a federal school code. This includes culinary schools, technical colleges and cosmetology schools. If you’re going back for a vocational degree, many trade schools also are eligible. Students can use 529 funds toward almost every college or university, including law, medical, business and other graduate schools. You can still open a 529 in one of these states, but you won’t receive any tax breaks. Not every state offers a tax deduction or credit for 529 contributions. If you live in one of these states, you can choose the best 529 instead of being limited to the one in your state. However, there are seven states that allow residents to contribute to another state’s 529 and still use the deduction. For example, if you live in New Mexico and open a Colorado 529, you won’t qualify for the New Mexico 529 tax deduction. You’re not obligated to open a 529 from your state, but most states require that you contribute to the state plan to receive the deduction. Many states provide a tax deduction or credit if you contribute money to a 529. You can search our list of best and worst 529 plans by state, which compares 529 plans by fees and performance. (In short, yes, a 529 is still the best way to save in most cases.) In these instances, using a 529 plan is one of the most popular strategies.īut for adults saving to go back for another degree, will the same strategy suffice? How would someone saving for graduate school make the best use of a 529 account? Follow our seven steps to use a 529 plan to save for graduate school, which should answer the above questions and more. Most of the conversation about saving for college centers around parents or grandparents looking to fund their children or grandchildren’s education.
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