What is a 529 plan?

Pay taxes on earnings later—or not at all

There may be tax advantages to saving in a 529 plan. As long as the money stays in the account, no income taxes will be due on earnings. When you take money out to pay for qualified education expenses, those withdrawals may be federal income tax-free—and, in many cases, free of state tax too.

US residents, all income levels

There are no income restrictions on 529 plan accounts.

To open the account, you must be a US resident, age 18 or over, with a US mailing and legal address, and a Social Security number or Tax ID.

Anyone with a Social Security or Tax ID number

Anyone, of any age, with a Social Security or Tax ID number can be a beneficiary.

The beneficiary can even be the same person who sets up the account.

Open an account or gift money to an existing account

Anyone who wants to save for a child's education can open a 529 plan account.

There may be benefits to opening an account. The account owner keeps control of the money, can make investment decisions, and can even change the beneficiary if plans change. There may be estate tax benefits in some cases.

But you can also gift money to an existing 529 plan account. In fact, account owners can enroll in our free college gifting program. It lets family and friends contribute gifts electronically and makes it easy for account owners to send invitations and track gifts from their private dashboard.

Contributions (up to a certain amount) are not subject to the federal gift tax

Contribute up to $90,000 ($180,000 per married couple) per beneficiary in a single year without eating into your lifetime gift-tax exclusion.*

Once assets are in the account, they are generally considered to be out of the account owner's estate.

Take advantage of professional money management experience from Fidelity

Your investment options include age-based investment strategies managed by Fidelity or you can build a custom investment mix from pre-set portfolios made up of Fidelity mutual funds, index funds, and bank deposit accounts.

Take advantage of professional money management experience from Fidelity

Withdrawals from a 529 plan account can be taken at any time, for any reason. But, if the money is not used for qualified education expenses, federal income taxes may be due on any earnings withdrawn. A 10% federal penalty tax and possibly state or local tax can also be added.

There are exceptions to the 10% penalty—for instance, if the beneficiary receives a scholarship or attends a US military academy. Any earnings would still be subject to federal income tax and any state and local taxes.