Question

Select all that apply

Section 529 college savings plans ______,

-allow for federal tax deductible contributions
-provide tax-exempt distributions for college expenses
-are offered by most states

Answer 1

Section 529 college savings plans provide tax-exempt distributions for qualified educational expenses and are offered by most states, but do not allow for federal tax-deductible contributions.

Step-by-step explanation:

Section 529 college savings plans are tax-advantaged savings plans designed to encourage saving for future college costs. When considering which attributes apply to Section 529 plans, it is important to note that:

• ​Section 529 plans do not allow for federal tax deductible contributions. Instead, they grow tax-deferred, and the earnings are not taxed when used for qualified educational expenses.
• ​They provide tax-exempt distributions for college expenses, meaning that withdrawals used for qualifying educational costs are not subject to federal income tax.
• ​Section 529 plans are offered by most states, and residents may receive state tax benefits if they contribute to their home state's plan.

In summary, while contributions to a 529 plan are not federally tax-deductible, earnings in the plan grow tax-free if they are used for qualified educational expenses, and these plans are widely available through most states which may offer additional tax advantages.