The number 529 is the section of the Internal Revenue Code that governs the operation of state sponsored, tax advantaged college savings plans.
A 529 College Savings Plan allows you to put aside money for future higher education expenses. Most states offer them. The money grows tax deferred and is tax-free when withdrawn if used to pay qualified higher education expenses. And because of their easy eligibility and contribution requirements, many families have found that 529 plans offer the best opportunity to save for college.
Virginia offers four 529 College Savings Plans:
- Virginia Prepaid Education Program (VPEP)
- Virginia Education Savings Trust (VEST)
- CollegeAmerica (available through financial advisers)
- CollegeWealth (opening soon)
Your money has more earning potential
Deferring taxes can make a difference in the rate at which college savings accumulate. As you consider college savings programs, keep in mind the powerful combination of tax-deferred growth in addition to the advantage of tax-free withdrawals offered by 529 plans.
Click here [PDF document, 30kb, opens in new window] to view the chart that illustrates the advantage of tax-deferred compounding.