TurboTax / Tax Calculators & Tips / All Tax Guides / College / Video: What Is a 529 Plan Contribution?

Video: What Is a 529 Plan Contribution?

Updated for Tax Year 2015


A 529 plan contribution is a way to save some money on taxes through contributions to an account that can be used for education expenses. Get the facts on a 529 plan contribution with help from TurboTax in this video on tax tips.

Video transcript:

Hello, I'm Jeremy from TurboTax with some important information for parents.

Do you plan on helping your children with the cost of college? If so, you should consider putting money away in a 529 plan and save some money on taxes too.

  • A 529 plan is similar to some of the retirement plans you may contribute money to each week.
  • Although no deduction is allowed for your contributions to the account, the balance can grow tax free on contributions totaling approximately $200,000.
  • This means you never pay taxes on the interest or dividends your money earns.
  • As long as you only make withdrawals to pay for the beneficiary's education expenses such as tuition, books and room and board, balances remain tax free.

These plans are also quite flexible.

  • You can set up multiple accounts for different beneficiaries including yourself and others who are not your children.
  • If you change your mind, you can always change the beneficiary.

Before you set up one of these plans, you should be aware that two types exist, prepaid tuition plans and college savings plans.

  • The funds you contribute to a prepaid tuition plan may be guaranteed by your state, but generally you are restricted to certain low risk investments.
  • If you are looking for higher annual returns, then the college savings plan may be just right for you but because of the higher level of risk, states will not guarantee your funds in a college savings plan.

For more tax tips and guidance, visit TurboTax.com.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or efile and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal efile of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • Benefit Assist: After you file, TurboTax automatically shows you a full list of government benefits you may qualify for, like Food Stamps or reduced phone & utilities. Plus, we help you apply, saving you time and making it easier than ever to get more money! Estimate based on calculation of Benefit Assist users from tax year 2013 and published reports of average benefit and savings amounts from federal and state programs. Benefit Assist users who received one or more federal or state benefits received on average $576 (based on survey March-June 2015). Actual amounts and qualifications based on your individual situation; some individuals will not qualify. Feature may not be available for all customers.