Dear Liz: Last week we had an infant come into this world and we’re already thinking about college. I know you’ve addressed this before, but things change and I was wondering if the 529 plan is still the way to go? If our son decides not to go to college, what are the tax consequences?
Answer: Congratulations! Yes, state-sponsored 529 college savings plans are still a great way for many families to save for future college costs. The money grows tax deferred and withdrawals are tax free when used for qualified education expenses.
Even if your son opts not to go to a four-year college, he will likely need some kind of post-secondary education. Withdrawals from 529 plans can be used to pay for any accredited school in any state, including community college and trade schools.
On the off chance that he doesn’t get any kind of schooling, or conversely