Features and Benefits - NY529 Advisor Site

Features and Benefits

Named after Section 529 of the IRS tax code, 529 plans offer tax-deferred growth with tax-free withdrawals. Take advantage of the potential tax savings and many other valuable features that can make saving for college more flexible, accessible and achievable.

Income tax advantages

Investment earnings in a 529 plan compound on a tax-deferred basis, and qualified withdrawals are federal tax free.1 Additionally, select states offer further state tax benefits. For example, account owners who are New York State taxpayers can deduct up to $5,000 in contributions on their state income tax return each year ($10,000 if married filing jointly) for investing in their 529 plan accounts sponsored by the State of New York.2

Learn more about the power of tax-deferred compounding and other tax benefits.

Special estate and gift tax benefits

Contributions to 529 plans are considered completed gifts, which means current assets and future earnings are excluded from your taxable estate for federal estate tax purposes – even though you retain control of the assets for the life of the account. 529 plans also allow you to contribute five years' worth of gifts in one year, up to $75,000 per beneficiary (or $150,000 if married and filing jointly) without incurring the federal gift tax, making it a valuable way to put large contributions to work immediately for college while reducing the size of your taxable estate.3

Get more information on how you can use 529 plans to reduce estate taxes and create a lasting education legacy for future generations.

Accessible and flexible

529 college savings plans are available to everyone, with no income or state residency requirements, provided they have a Social Security number or Tax ID. As account owner, you can name a beneficiary of any age living in any state. It could be a child, grandchild, niece, nephew, friend, spouse or another adult – even yourself.

As account owner, you also have the flexibility to:

  • Change beneficiaries or transfer a portion of your account to another member of the current beneficiary's family.4
  • Leave accounts open an unlimited time for students who attend college later than planned.
  • Control how the account assets are invested and distributed, even after a beneficiary reaches the age of majority. This helps ensure that the money earmarked for college is actually used for college.
Broad choice of schools

Your account may be used at any eligible public or private institution in the U.S. and overseas – including community colleges, four-year universities, graduate schools and vocational-technical schools. Account assets can go toward tuition, fees, certain room and board expenses, books and other qualified higher education expenses. Click here for more information about qualifying schools.

Wide range of investment options

529 college savings plans offer investors a wide range of investment options to suit their investment style and risk tolerance. In addition to having a suite of fixed-asset allocation portfolios and single-fund portfolios, New York's 529 Advisor-Guided College Savings Program includes "age-based" portfolio options that automatically reallocate to more conservative investments as the beneficiary approaches college age.

Learn more about the Advisor-Guided Plan investment options offered by J.P Morgan and State Street Global Advisors.

Friends and family can contribute

Saving for college can be daunting given consistently increasing tuition rates. The good news is you don't have to do it alone. Most 529 plans make it easy for friends and family to give a gift to a beneficiary's account.

Learn more about Ugift®, the online gifting program offered by New York's 529 Advisor-Guided College Savings Program.

1 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Federal law allows distributions for K-12 Tuition Expenses of up to $10,000 per beneficiary per year. Under New York State law, distributions for K-12 Tuition Expenses will be considered non-qualified withdrawals and will require the recapture of any New York State tax benefits that have accrued on contributions.

2 Deductions may be subject to recapture in certain circumstances, such as rollovers to another state's plan or New York non-qualified withdrawals.

3 No additional gifts can be made to the same beneficiary over a five-year period. If the donor does not survive the five years, a portion of the gift is returned to the taxable estate.

4 Section 529 defines a family member as a son, daughter, stepson or stepdaughter, or a descendant of any such person; a brother, sister, stepbrother, or stepsister; a father or mother, or an ancestor of either; a stepfather or stepmother; a son or daughter of a brother or sister; a brother or sister of the father or mother; a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; the spouse of the beneficiary or the spouse of any individual described above; or a first cousin of the beneficiary. Gift or generation-skipping transfer taxes may apply. Please consult your tax advisor for more information.