Question

Select all that apply

Section 529 college savings plans ______,

-are accounted for using a custodial fund
-are tax deductible in some states
-are offered by the federal government
-investment amounts grow tax-deferred

Answer 1

Section 529 college savings plans are state-sponsored savings plans, tax deductible in some states, and permit tax-deferred growth of investment amounts; they are different from 401(k)s which use custodial funds.

Step-by-step explanation:

Section 529 college savings plans are tax-advantaged savings plans designed to encourage saving for future education costs. Among the options provided, a Section 529 plan is tax deductible in some states and investment amounts grow tax-deferred. While 529 plans are sponsored by states, they are not directly offered by the federal government. Similar to other tax-deferred savings mechanisms like 401(k)s and 403(b) plans, which allow for pre-tax contributions and tax-deferred growth, a 529 plan offers similar tax benefits for education savings. However, contrary to 401(k) which uses a custodial fund, 529 plans are not accounted for in this manner.