529 education savings plans: Gifting made easy

Have you ever thought about contributing to a 529 education savings plan as a gift? It's a tax-smart and simple way to help your children, nieces, nephews, grandkids or a close family friend get closer to college. The great part is that anyone can make a 529 contribution anytime of the year no matter the age of your loved one. Whether it's for a newborn, a toddler, or even a teenager, it's never too early to invest in their education.

A 529 contribution makes a thoughtful gift for any occasion — birthdays, holidays, graduations or just because. Every contribution, big or small, helps build a brighter future by growing tax-advantaged funds for qualified education expenses. It's a simple way to make a lasting impact while supporting a child's short- or long-term education goals.

A 529 is a gift that parents appreciate too, as reflected in a recent Edward Jones survey. Of the more than 2,000 participants polled, 31% of parents saving for their children’s education preferred that friends and family contribute to 529 plans and education savings goals instead of giving gifts such as toys or electronic gadgets for holidays and birthdays.

As the gift giver, you may be eligible to receive additional benefits beyond simply finding a convenient and suitable gift. Let's explore this further.

What is a 529 plan?

A 529 education savings plan is a tax-advantaged investment account that can be used to pay for qualified education expenses for the account's beneficiary.

The earnings from a 529 plan accumulate tax free, and withdrawals are federal income tax-free and penalty-free if they’re used for qualified higher education expenses. If distributions are used for nonqualified expenses, earnings are subject to taxes and a 10% penalty.

Qualified postsecondary education expenses may include:

• Tuition and fees
• Books
• Required school supplies
• Room and board — the beneficiary must be at least a half-time student; includes off-campus housing up to the cost of on-campus room and board.
• Computers and related accessories, such as printers, internet access and educational software primarily used by the beneficiary.

Qualified elementary and secondary school expenses may include:

• Up to $10,000 of tuition expenses per year per beneficiary in connection with enrollment or attendance at public, private or religious elementary or secondary schools.

Before using funds for elementary and/or secondary education expenses, please consult with the plan sponsor and/or a qualified tax advisor to avoid incurring potential state tax consequences and/or penalties.

Although 529 plans offer federal tax benefits, they're sponsored by individual states. This means that while they're treated the same for federal taxes, state tax treatments can vary. Each state offers different plans with their own investment options.

There may be state tax incentives available to in-state residents who invest in their home state’s 529 plan or other state benefits, such as financial aid, scholarship funds and protection from creditors that are only available for investments in such state's 529 qualified tuition program.

Benefits of a 529 plan

How Edward Jones can help

A gift to a 529 plan is a valuable way to help your friends or family members fund future educational opportunities — not to mention a great birthday or holiday gift. Your Edward Jones financial advisor can work with you to determine whether a 529 gifting strategy is right for you and your family’s financial goals.