New state-sponsored investment programs have special tax status under section 529 of the Internal Revenue Code. A 529 Savings Plan, also known as a "qualified state tuition program" or "QSTP," provides for tax-deferred accumulation of all account earnings until qualified withdrawals for higher-education expenses are made by the student. Withdrawals will be taxed to the student at that time-not to the participant who made the original contributions. 529 Savings Plans feature low minimum contribution requirements and high contribution limits-unlike the Education IRA, which is limited to $500 annual contributions. * Please be aware there are potential risks and costs associated with 529 College Savings Plans. The exemption of qualified withdrawals from federal income tax will expire on December 31, 2010 unless extended by Congress. |