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529 Plans: Not Just for College Anymore

529 education plans were originally designed as college saving plans that offered certain tax advantages. The account owner creates the account, transfers assets to the account and names a beneficiary. The money earned in the account is not subject to federal income tax as long as it remains in the account. Historically, 529s were not subject to federal income tax if the funds were withdrawn and used for qualified higher education expenses. Now plan owners can withdraw assets of up to $10,000 per year per beneficiary to be used for K-12 tuition. One note of caution: while the definition of qualified higher education expenses is fairly broad, when using funds from 529s for elementary and secondary education, withdrawals can only be made for tuition.

Keep in mind that to get the most value from a 529 account, you need time. Using the 529 money for early education impedes the benefits of tax-free growth.