An investment in your child's future may be the most important investment you will ever make. We work to understand your vision for your child's future, including the type of school they will attend and how much you are able to save— so we can help you find the right solution.
Tax advantaged savings for your child's education
A Section 529 plan provides a tax-advantaged way to invest for education expenses. Withdrawals, including any earnings, are tax free as long as the money is used for qualified higher education expenses.1 Funds can be used for tuition and fees, room and board, books, required supplies and equipment, computers or peripheral equipment, computer software, or Internet access and related services, and certain services for special needs beneficiaries.2
Effective January 1, 2018, 529s assets can be used federally tax-free to pay for tuition at an elementary or secondary public, private or religious school of up to $10,000 per year. State tax treatment may vary.
Contributions can be up to the annual gift amount for federal gift tax purposes. They're considered completed gifts and are excluded from your estate for federal estate tax purposes. A five-year gifting provision allows you to make five years' worth of gifts all at once, as long as no additional gifts are made to the beneficiary in the five years.3
You retain control of the assets. If your current beneficiary does not use the funds, you can change beneficiaries at any time without any tax consequence, as long as the new beneficiary is a member of the same family as the old beneficiary. 4
The College Planning Calculator can help you take a closer look at how much you may need to invest to meet your college funding goals.
Education Funding Brochure
College Savings Comparison Chart Fact Sheet
1.To be eligible for favorable tax treatment afforded to the earnings portion of withdrawals from Section 529 accounts, withdrawals must be used for "qualified higher education expenses," as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax as well as state and local income taxes.
For distributions after December 31, 2017 qualified higher education expenses include tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. These distributions are limited to $10,000 per calendar year, across all 529 accounts for the same beneficiary. State tax treatment may vary.
2. Institutions must be eligible to participate in federal student financial aid programs. Some foreign institutions are also eligible. The beneficiary must be attending an accredited institution at least half time for room and board to be considered an eligible expense.
3. Contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year can be prorated over a five-year period without subjecting you to gift tax or reducing your federal unified estate and gift tax credit. If less than the $75,000 ($150,000 for married couples filing jointly) maximum is contributed, additional contributions can be made without subjecting you to federal gift tax, up to a prorated level of $15,000 ($30,000 for married couples filing jointly) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. For contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year, if the account owner dies before the end of the five-year period, a prorated portion of the contribution may be included in his or her estate for estate tax purposes. Please consult your tax and/or legal advisor for such guidance.
4. You are generally permitted to change the beneficiary to another qualified member of the family, as defined under the Internal Revenue Code, without triggering income tax and 10% additional federal tax.
Before you invest in a 529 college savings plan, request the plan's official statement from your Merrill Lynch financial advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the plan, which you should carefully consider before investing. You should also consider whether your home state or your designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds and protection against creditors that are only available for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.
Section 529 plans are intended to be used to save for qualified higher-education expenses.
Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and /or tax advisor before making any financial decisions.
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