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Plus, 529 savings plan contributions can be invested, similar to the structure of a 401(k), and any investment profits used to pay for qualified education expenses are 100% tax-free.
Paying college expenses directly from a 529 account may reduce eligibility for the American Opportunity Tax Credit, due to IRS coordination restrictions. To claim the full credit (in addition to meeting other criteria, such as income limits), $4,000 of college tuition and textbook expenses per year should be paid from non-529 plan funds. [26]
Some states offer deductions for 529 plan contributions up to certain limits. 529 plan contributions and qualified withdrawals are tax-free. If you pay state income taxes, you’ll need to report ...
Image source: Getty Images. As of 2025, the contribution limits to 529 college savings plans range from a low of $235,000 to a high of $575,000. And here are the states with the highest ...
The 529 college savings plan is one of many financing options you may have heard about or investigated on your own. ... But you will likely pay income tax on the withdrawal — not FICA or ...
Unlike with 401(k) plans and other retirement savings vehicles, the IRS does not set annual contribution limits for 529 college savings plans. Instead, the states that sponsor individual 529 plans ...
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