What is a 529 Plan? It is a way to invest your money to be used for future educational expenses for college. Distributions from 529 plans can be used to pay for tuition, books, and other expenses for college. The American Recovery and Reinvestment Act of 2009 has added computer technology to the list of expenses that can be payed for by a 529 plan. This means that you can use 529 plan money to buy computers, software, and pay for internet access while the beneficiary is enrolled in college. However, this does not include any software designed for entertainment, such as video games.
All 50 states sponser some sort of 529 plan. There are two different types of plans – the prepaid tuition plans and savings plans. Families should decide which kind of plan works best for them. Also, remember that using a 529 plan to pay for college does not necessarily exlude you from using the lifetime learning credit of the American opportunity credit. For more informaiton on 529 plans you should contact your tax or investment advisor.