High school students in the CSF study — 21% — reported their families are using 529 education savings plans to fund their higher education.
A 529 is a tax-advantaged savings plan that was created by Congress to assist families in paying for college expenses. Unlike custodial accounts, which are taxable based upon income and capital gains, funds used for qualified educational expenses grow federal tax-free within a 529 plan, allowing more of a family's savings to be used for tuition and less of it going toward taxes.
529 plans can be used to pay for technical, career and vocational training, as well as tuition and room and board, at four-year colleges. The funds can be used to pay for books or any supplies necessary for courses.
Technical schools and career and vocational training programs are increasing in popularity due to their many advantages, which include a shorter time frame to finish the education and the lower cost. But it's not for everyone.
"Not all kids have the technical skills that lead to an interest in a career attending a tech or vocational school," Ms. Tsai said. "The traditional four-year university where you're able to take classes on history and creative writing is always going to have a purpose."
The College Savings Foundation is a trade group for 529 plan program managers, state sponsors and financial services firms that manage the accounts. The nonprofit organization reports there are 15.8 million individual 529 plan accounts in the U.S. with a total of $457.7 billion in assets families have set aside for future higher education expenses as of March 31, 2022, according to ISS Market Intelligence.
Every state in the country has at least one 529 plan. Some states offer more than one. There are currently 93 operating 529 plans across the country.
Pennsylvania allows a tax deduction for any contribution — family or non-family — to 529 plans up to the annual gift exclusion amount — $15,000 per contributor or $30,000 for a married couple. Pennsylvania rules are considered especially generous because the state will give contributors the deduction regardless of whether it is to a Pennsylvania plan or an out-of-state plan.©2022 PG Publishing Co. Visit at post-gazette.com. Distributed by Tribune Content Agency, LLC.