What is a 529 Plan?
529 refers to Section 529 of the Internal Revenue Code. 529 plans are tax-advantaged programs that help families save for college. Residents of any state can invest in any state's 529 Plan, you do not have to be a resident of a particular state to invest in that state's plan. There are three types of 529 plans:
- State-sponsored college savings plans. The value of these plans fluctuates with the markets. They can be used at eligible public and private colleges nationally and some colleges abroad. Some state plans offer state tax advantages in addition to federal tax advantages. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan. Qualified higher education expenses typically include: tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board; and certain expenses for "special needs" students.
- State-sponsored prepaid plans. These plans are designed to allow parents to lock in today's tuition rates at eligible public and private colleges or universities. Qualified higher education expenses typically include tuition and fees at in-state colleges and universities. Some have provisions to include room and board.
- Independent 529 Plan. A prepaid tuition program designed to provide you with an opportunity to prepay undergraduate tuition for a beneficiary at participating private colleges and universities throughout the United States. By participating in the Independent 529 Plan, you can pay for your beneficiary's tuition and certain fees today and lock in current tuition rates and a discount now for your beneficiary's future enrollment at a Participating Institution. The Independent 529 Plan offers the same federal tax advantages as the 529 savings plans originally specified by the Internal Revenue Code.
With all 529s-both savings, and prepaid programs-there is no income or age limit for participation. You can even open an account for yourself.
How do 529 Plans vary?
529 Plans vary in a number of ways, including contribution limits to the account (defined by the states), fees to open and maintain an account, in-state tax treatments such as a state tax deduction, investment options offered, and the financial services company that manages the plan. There may also be other differences, such as special programs or benefits defined by the particular plan.
Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan.
How does a 529 Plan compare to other investment choices, such as custodial accounts?
To compare features of 529 plans and custodial accounts, use our comparison chart.
What is the Minnesota College Savings Plan Matching Grant Program?
To qualify for a matching grant, the following requirements must be met:
- Application: The account owner must apply for a matching grant by May 1 of the year immediately after the calendar year in which contributions were made. Account owners who opened an Account or made a contribution during 2007 can complete the 2007 Matching Grant Form.
- Minimum Contribution: $200 or more must have been contributed to the Account during the calendar year ending on December 31st.
- Residency: The beneficiary's family must be Minnesota residents:
- If beneficiary is younger than age 25, the parent(s) or legal guardian(s) must have filed a Minnesota income tax return as a Minnesota resident and claimed the beneficiary as a dependent on their federal income tax return for the calendar year in which contributions were made.
- If beneficiary is age 25 or older, the beneficiary and spouse, if any, must have filed a Minnesota and a federal income tax return as a Minnesota resident for the calendar year in which contributions were made.
- Family Income: The family income of the beneficiary must be $80,000 or less for the year in which contributions were made. The beneficiary's family income is defined differently depending on the beneficiary's age.
- If the beneficiary is younger than age 25, family income is defined as the combined adjusted gross income of the beneficiary's parent(s) or legal guardian(s), as reported on their federal income tax return for the calendar year in which contributions were made. If the beneficiary's parents are divorced, the income of the parent claiming the beneficiary as a dependent on his or her federal income tax return and the income of that parent's spouse, if any, is used to determine family income.
- If the beneficiary is age 25 or older, family income is the combined adjusted gross income, as reported on their federal income tax return, of the beneficiary and his or her spouse, if any, for the calendar year in which contributions were made.
If the beneficiary's family income is $50,000 or less, the matching grant is equal to 15 percent of the contributions, up to a maximum of $300. If the beneficiary's family income is more than $50,000, but not more than $80,000, the matching grant is equal to 5 percent of the contributions, up to a maximum of $300. If multiple accounts are established for the same beneficiary, the maximum matching grant per year per beneficiary cannot exceed $300.
The account owner's account must have been established at least three (3) years before a qualified withdrawal of matching grant funds may be taken.
Matching grants are dependent upon appropriations from the Minnesota Legislature as approved by the Minnesota Governor. Eligibility requirements for matching grants are subject to change. If the total amount of matching grants exceeds the amount appropriated, match grant awards will be proportionately reduced.
Complete the Application to Receive State Matching Grant (PDF, 181KB) and return to:
Minnesota College Savings Plan
PO Box 64028
St. Paul, MN 55164-0028
See the Minnesota College Savings Plan Disclosure Booklet and Participation Agreements (PDF, 773KB) for additional information.
Read more FAQs. |
