The account owner has the authority to make contributions, select investment options, and withdraw funds for qualified educational expenses without incurring federal income tax on the earnings, as long as the funds are used for eligible costs such as tuition, room and board, and supplies. 529 plans are often set up by parents or grandparents to help save for a child’s or grandchild’s future college education, providing a tax-efficient way to accumulate funds over time.
529 Account Owner Example
For example, if a mother establishes a 529 account for her child’s education, she can contribute money to it over the years and choose investments that align with her risk tolerance, ultimately using the accumulated funds for her child’s college tuition when the time comes.