What is a 529 plan?
Before you open an account, get the facts on this tax-advantaged education savings option.
529 plan overview
Additionally, funds can be used for repayment of up to $10,000 in qualified student loans, and expenses for certain apprenticeship programs. NOTE: The SECURE Act of 2019 made this change retroactive to distributions made after December 31, 2018.
U.S. residents of any state, who are 18 years of age or older (or the age of majority in some states), may invest in most state plans.
The 529 plans managed by Fidelity offer a choice of investment options.
- The Age-Based Strategy invests in portfolios that automatically become more conservative as the beneficiary nears college age. Fidelity offers three types: Fidelity Funds, Fidelity Index, or Blend.
- The Custom Strategy allows you to allocate your assets among Static, Individual Fund, Age-Based, and Bank Deposit portfolios.
Who can open a 529 plan?
People of all income levels; there are no income restrictions.
Any U.S. resident who is 18 years or older, has a U.S. mailing and legal address, and a Social Security number or Tax ID.
Who can be a beneficiary?
Anyone who has a Social Security number or Tax ID.
A future college student of any age—the beneficiary can even be the same person who sets up the account.
Investing by grandparents and others
Grandparents or others who wish to contribute to a child's education savings plan may want to open a 529 plan account.
The owner of the account, also known as the participant, controls the account, including investment decisions and the distribution of assets.
The account owner can take advantage of possible gift and estate tax benefits.
Grandparents, other relatives, or nonrelatives can also gift to an existing account. In fact, account owners can enroll in our free College gifting program that provides a page for family and friends to easily contribute a gift electronically; plus a separate, private dashboard where the account owner can make edits, send invitations, track gifts, and more.
Gift and estate planning benefits
Contribute up to $75,000 ($150,000 per married couple) per beneficiary in a single year without the money being subject to the federal gift tax.*
Once assets are in the account, they are generally considered to be no longer part of the account owner's estate.
Professional money management
Investors in Fidelity-managed 529 plans may benefit from Fidelity's professional money management.
Depending on your investment choice, 529 portfolio assets may be invested entirely in Fidelity mutual funds, an interest-bearing bank deposit portfolio, or in funds managed by several different companies, including Fidelity.
Control of assets and distributions
The account owner maintains ownership of the account until the money is withdrawn.
Withdrawals from a 529 account can be taken at any time for any reason. However, if the money is not used for qualified education expenses, any earnings are subject to federal income taxes at the recipient's rate. A 10% federal penalty tax and possibly state or local tax are also added.
If the beneficiary receives a scholarship or attends a U.S. military academy, the scholarship amount or cost of attendance can be withdrawn from the 529 plan account and the 10% federal penalty tax does not apply. However, the earnings are subject to any other applicable taxes, including federal income tax.
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An accelerated transfer to a 529 plan (for a given beneficiary) of $75,000 (or $150,000 combined for spouses who gift split) will not result in federal transfer tax or use of any portion of the applicable federal transfer tax exemption and/or credit amounts if no further annual exclusion gifts and/or generation-skipping transfers to the same beneficiary are made over the five-year period and if the transfer is reported as a series of five equal annual transfers on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. If the donor dies within the five-year period, a portion of the transferred amount will be included in the donor's estate for estate tax purposes.
The UNIQUE College Investing Plan, U.Fund College Investing Plan, Delaware College Investment Plan, and Fidelity Arizona College Savings Plan are offered by the state of New Hampshire, MEFA, the state of Delaware, and the Arizona Commission for Postsecondary Education, respectively, and managed by Fidelity Investments.
If you or the designated beneficiary is not a New Hampshire, Massachusetts, Delaware, or Arizona resident, you may want to consider, before investing, whether your state or the beneficiary's home state offers its residents a plan with alternate state tax advantages or other state benefits such as financial aid, scholarship funds and protection from creditors.
Units of the portfolios are municipal securities and may be subject to market volatility and fluctuation.
Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.