States across the U.S. in recent years have been introducing programs known as 529 plans, which are designed to encourage people to save early for college and reap tax benefits in the process.
While the federal and state-backed 529 plans have been lauded as one way to assist with the ever-increasing cost of attending a higher-education institution, there also has been confusion because the requirements within plans can vary from one state to the next.
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Below are eight facts about North Carolina’s 529 plan, known officially as the North Carolina College Savings and Investment Program:
1. As noted on the plan’s official website, any North Carolina resident with a Social Security number, 18 years of age or older, can deposit funds into a state-initiated 529 plan. There is no cost to enroll in the program.
2. Earnings from a 529 plan-affiliated account in North Carolina are free from state and federal taxes, so long as all requirements are met once funds are withdrawn.
3. While funds within a 529 plan are typically used to pay tuition, the monies also can be applied to other related expenses, including student fees, room and board, books, and equipment needed to attend a class.
4. As noted on Savingforcollege.com, up to $410,000 can be placed into a beneficiary’s 529 plan in North Carolina. The minimal contribution is $25.
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5. In North Carolina, 529 plan participants have three investment options: age-based, static, and underlying. Consultation with a financial advisor or a similar professional can help in understanding the differences between the different types of accounts.
6. While most participants in North Carolina’s 529 program are parents or grandparents contributing funds toward their respective child’s or grandchild’s education, contributors can give funds to any beneficiary, whether or not he or she is related.
7. Unlike some state 529 plans, North Carolina’s does not require the beneficiary reside within the state. However, state tax breaks are available only to North Carolina residents.
8. North Carolina’s 529 plan does not require the beneficiary attend a university, college, or trade school within the state. He or she is free to choose another institution outside the state, so long as it participates in federal financial assistance programs.
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