American Funds ®

College Savings

529 Plan Basics

Learn why millions of people saving for higher education have turned to 529 plans for their attractive combination of benefits.

Anyone can contribute regardless of income level

Withdrawals for qualified expenses are free from federal taxes

Some states offer tax deductions/credits

Account owner always controls the account

Available to pay for K–12 expenses

Unlimited changes to investment mix permitted

Beneficiary changes permitted

 
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Tax Advantages

  • Earnings in 529 accounts can grow free from federal tax, and withdrawals for qualified higher education expenses are free from federal tax.
  • A number of states allow a deduction from (or a credit against) state taxes for all or part of a contribution to certain 529 plans.
  • You can contribute up to $14,000 ($28,000 for married couples) annually without gift-tax consequences. Under a special election, you can invest up to $70,000 ($140,000 for married couples) at one time by accelerating five years’ worth of investments.

Flexibility

  • There are no income limits. You can contribute no matter how much you earn.
  • Though plans are administered by individual states, investors can choose from any plan, regardless of where they live.
  • You can contribute until your account value reaches $350,000.1
  • Investors can use a 529 plan to pay qualified higher education expenses at any eligible educational institution, not just schools in the state sponsoring your plan.

Control

  • You, the account owner, rather than the beneficiary, maintain control of account assets and determine the timing and amount of distributions.
  • You can change beneficiaries without penalty provided the new beneficiary is a member of the previous beneficiary’s family.

A Few Things to Note About 529 Savings Plans

  • If you withdraw money from your 529 college savings plan account for purposes other than higher education, your earnings will be subject to federal income tax and possibly a 10% federal tax penalty.
  • Your 529 college savings plan holdings could impact your beneficiary’s ability to qualify for grants and student loans. Ask your financial professional for details.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.  

Depending on your state of residence, there may be an in-state plan that offers tax and other benefits not available through CollegeAmerica.   Before investing in any state's 529 plan, investors should consult a tax advisor. 

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Investments in a CollegeAmerica account cannot be made if the value of all 529 plans maintained by Virginia529 (CollegeAmerica, Virginia 529 prePAID℠, Virginia529 inVEST℠ and CollegeWealth℠) for the same beneficiary is $350,000 or more. 

If withdrawals from 529 plans are used for purposes other than higher education, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. 

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors® and sold through unaffiliated intermediaries.