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Qualified Tuition Plans
Qualified Tuition Plans (QTPs), or Section 529 plans, offer two different
ways to help defray the cost of college: College Savings Plans that allow
students of all ages to save for college costs or Prepaid Tuition Plans
that lock in today's tuition rates at any of a state's eligible public
colleges or universities.
QTPs are sponsored by your state, or their agencies or institutions.
Also, as of 2001, private eligible education institutions, including
religious schools, can offer QTPs in the form of prepaid tuition credits.
Just like an ESA, your QTP savings plan grows tax-deferred, you can take
distributions from a QTP tax-free for qualified education expenses, and you
can change beneficiaries to another family member at any time. Plus, with a
QTP account, you're allowed to roll savings from one QTP to another without
penalty, one time during a one-year period.
Anyone can establish a QTP, including your child's grandparents, other relatives
or non-relatives. (You can even set one up for yourself.) A QTP account takes cash
contributions only, not stocks or mutual funds.
The account holder controls funds in the account, not the beneficiary. And,
for most plans, the beneficiary does not have to attend a school in the same
state in which the QTP was set up.
Contributions to a QTP are not tax deductible at the federal level, but some states allow tax deductions for contributions to their own plans.
Contributions to a QTP are not tax deductible at the federal level, but some states allow tax deductions for contributions to their own plans.
Unlike other education provisions, QTP contributions and tax-exempt
distributions are not subject to any income limitations.
If you're applying for financial aid, distributions from prepaid tuition
accounts are treated as the student's income.
Is a Qualified Tuition Plan right for you? Contact your H&R Block
Financial Advisor to open an account today!
Don't yet have an advisor? Visit our office locator to find an advisor near you or call 1-866-295-7912.
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