What is a 529 Plan?
529 plans help families save for college. The name "529" refers to Section 529 of the IRS tax code, which gives these plans special tax breaks to encourage saving.
There's no doubt your children or grandchildren will benefit from higher education. Studies show that a college degree is worth nearly a million dollars in lifetime earnings. College tuition is an investment in their future.
Two ways to save. The Pennsylvania 529 College Savings Program offers two savings plans. The PA 529 Guaranteed Savings Plan (GSP) is a lower-risk plan that helps your savings keep pace with rising tuition. The PA 529 Investment Plan (IP) lets you choose from 15 investment options from The Vanguard Group. Compare plans.
Easy to set up and easy to use. You can use the money to pay for college, many technical and career schools, and qualified expenses. There are no income limits, and anyone can contribute. Grandparents, aunts, uncles and family friends can all help your student pay for college.
State tax deduction. You can deduct your contributions from your Pennsylvania taxable income up to $14,000 per beneficiary per year. Married couples can deduct up to $28,000 per beneficiary per year, provided each spouse has taxable income of at least $14,000.
Tax-deferred growth. Your contributions grow free of federal and Pennsylvania income taxes while they remain in the account.
Tax-free withdrawals. When used for qualified expenses, you pay no income tax on the growth in your account.*
Gift and inheritance tax benefits. Section 529 plans also provide unique gift and inheritance tax benefits, including a special provision for gifts larger than the normal limit. And unlike other gifts, the account owner retains complete control over the contributions. Learn more about these tax advantages.
Why Choose a Pennsylvania 529?
As a Pennsylvania resident, you get special treatment. Not only are your contributions deductible from your Pennsylvania state income tax, the entire value of your account is exempt from Pennsylvania inheritance tax.* Assets held in a PA 529 plan are not counted when determining state financial aid for college. Assets in any other state 529 plan are counted. PA 529 assets are also protected from creditors in Pennsylvania. Assets in out-of-state plans are not protected.
Plus, Pennsylvanians can now send state tax refunds directly to a PA 529 College Savings account. Starting in tax-year 2016, you can now contribute all or part of your Pennsylvania state income tax refund directly to an existing PA 529 College Savings Program account. With the new option, all or a portion of a refund can be sent to one or multiple accounts.
The process is simple. When completing your PA-40, Personal Income Tax Return, enter code H and the amount in the donation section between lines 32-36. Additionally, submit a PA-Schedule P with your return when donating to one or more Pennsylvania 529 College Savings Program accounts. More information is available in the 2016 PA-40, Personal Income Tax Return Instructions. Visit Revenue.pa.gov to learn more.
Another unique benefit to PA 529 plans is the SAGE Scholars Tuition Rewards program, which offers tuition discounts to 300+ private colleges nationwide, including over 50 in Pennsylvania. One more great way to stretch your savings with a Pennsylvania 529 College Savings Plan. For more information, see below.
Additional Ways to Save
Looking for more ways to boost your college savings? Pennsylvania Treasury has partnered with nationally recognized programs to help you save more money. You can easily link these programs to your PA 529 account.
Earn free money from Upromise. Upromise is an online service designed to help families earn extra money for college when you shop online or in stores, eat out, buy groceries, travel and more.
You can join Upromise online after enrolling in PA 529, or by going directly to Upromise.com/pa. Your accounts can be linked so money in your Upromise account gets automatically transferred to your PA 529 account. Grandparents, aunts, uncles, and family friends can join Upromise and direct their rebates into your Upromise account, too.
Upromise is an optional service, separate from PA 529, and not affiliated with the Commonwealth or the Treasury Department. Specific terms and conditions apply. Visit Upromise.com to learn more.
Let friends and family help. Ugift is an innovative way to invite family and friends to celebrate birthdays and holidays with the gift of college savings. This easy-to-use service lets you invite the special people in your life to make gift contributions to your PA 529 account. And contributions can be deducted by the gift giver on their Pennsylvania state income tax returns.*
To get started, log in to your PA 529 account and click Ugift in the sidebar.
Ugift is an optional service, separate from PA 529, and not affiliated with the Commonwealth or the Treasury Department. Specific terms and conditions apply.
Make private colleges more affordable. SAGE Scholars Tuition Rewards (SAGE) is a free scholarship program that helps families earn Tuition Reward Points that reduce the cost of undergraduate tuition at participating private colleges and universities.
Each quarter you earn Tuition Rewards equal to 2.5% of the value of your PA 529 account – adding up to approximately 10% per year. Each point is worth $1.00 in scholarships at SAGE member schools. Learn more at tuitionrewards.com.
Tuition Rewards costs nothing to join. It's easy to get started – just sign up when you open your PA 529 account. To track your SAGE Rewards, to get more information, and to receive a 500-point bonus, register and visit your account at tuitionrewards.com. You'll get another 500-point bonus for each child that has a PA 529 account.
SAGE Scholars' Tuition Rewards is an optional service, separate from PA 529, and not affiliated with the Commonwealth or the Treasury Department. Specific terms and conditions apply. Contact Support@SAGEscholars.com for more information.
Compare the Alternatives
Compared to other popular college savings options– such as Coverdell accounts, U.S. Savings Bonds and traditional mutual funds – only the Pennsylvania 529 College Savings Program offers all of these advantages:
- Contributions deductible from Pennsylvania taxable income*
- Savings grow federal and state income tax-free when used for qualified expenses
- Favorable federal gift tax treatment**
- Avoid Pennsylvania inheritance tax
- The account owner – not the beneficiary – retains full control of the account
- Will not count against Pennsylvania state financial aid eligibility
- High maximum investment: $511,758 per beneficiary
- No age or income restrictions
- Earn free money through SAGE Tuition Rewards and Upromise programs
- Accounts can be transferred between beneficiaries