The tax advantages of a 529 plan
No federal income taxes to pay
You pay no federal income taxes on earnings while the 529 account is invested, and pay no federal income taxes when the money is withdrawn to pay for qualified education expenses. In addition, 34 states currently offer tax incentives as well.
Offset estate taxes
529 plans also offer a unique benefit of decreasing your taxable estate. In certain cases, contributions to the account can be removed from your estate for tax purposes, yet you retain control over the assets. 529 plans also offer a special gift tax exclusion.
Bypass federal gift tax
A special gift tax exclusion of 529 plans enables you to make five years' worth of gifts to a single beneficiary in a single year without triggering the federal gift tax.- Maximum for individuals is $85,000 for 2023
- Maximum for married couples is $170,000 for 2023
Ready for the next steps?
Talk to your financial advisor or call
Ready for the next steps?
Learn about the multiple tax benefits of making Putnam 529 for America part of your plan.
Estate planning fact sheetPutnam 529 for America brochure
Or, talk to your financial advisor or call 1-877-PUTNAM529
* This example assumes a hypothetical 6% nominal rate of return compounded monthly with an effective return of 6.17%, and a 28% tax bracket for the taxable account. The returns shown are for illustrative purposes only. They are not representative of any particular investment and are not intended to predict the return of any investment, which will fluctuate. Regular investing does not ensure a profit or protect against loss in a declining market. Capital gains, exemptions, deductions, and local taxes are not reflected. Certain returns in a taxable account are subject to capital gains tax, which is generally a lower rate than ordinary income tax rate and would make the investment return for the taxable investment more favorable than reflected on the chart. Investors should consider their personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision. These may further impact the results of the comparison.