Question

Which is a tax-free savings account that can only used for educational expenses?

A) Merit-based scholarships
B) Needs-based grants
C) Federal grants
D) A 529 plan

Answer 1

D) A 529 plan

Step-by-step explanation:

A 529 plan is a tax-free savings account that can only be used for educational expenses.

It is authorized by Section 529 of the Internal Revenue Code and mainly sponsored by the states to encourage savings for future educational costs.