529 Plan
A tax-advantaged account for education expenses.
What is 529 Plan?
Contributions are after-tax (often state-deductible), growth is tax-deferred, and withdrawals for qualified education expenses are tax-free. Non-qualified withdrawals face income tax plus a 10% penalty on earnings. Limited rollovers to a Roth IRA are now permitted under SECURE 2.0.
529 Plan: a worked example
$200/month from birth at 6% is roughly $77,000 by age 18, tax-free for tuition.
More terms in Taxes & Account Types
Capital Gain (Short-Term vs. Long-Term)
Profit on a sale, taxed by how long you held it.
Cost Basis
What you paid, used to compute gain or loss on sale.
Wash Sale Rule
A loss is disallowed if you rebuy the same security within 30 days.
Tax-Loss Harvesting
Realizing losses to offset gains and up to $3,000 of ordinary income.
Qualified Dividend
A dividend taxed at long-term capital gains rates.
Traditional IRA / 401(k)
Deduct now, grow tax-deferred, pay ordinary income tax on withdrawal.
Roth IRA / Roth 401(k)
Pay tax now, grow tax-free, qualified withdrawals are untaxed.
Required Minimum Distribution (RMD)
Mandatory annual withdrawals from tax-deferred accounts starting at 73.