College Savings Plans for Washington, DC, Maryland and Virginia

Saving for college can be an overwhelming task. But, the good news is that in recent years, college savings plans, also known as 529 plans, have been created to help families put aside funds for future college costs. The 529 plan is an education savings plan operated by a state or an educational institution, providing a way for your investment to grow tax-deferred and distributions to pay for your child’s college costs tax-free. Every state now has at least one 529 plan available and since there are no state residency requirements, it’s up to you to find the best plan for your needs.

There are two general types of 529 plans: prepaid programs and savings programs. The states offering prepaid tuition contracts covering in-state tuition will allow you to transfer the value of your contract to private and out-of-state schools. If you decide to use a 529 savings program, the full value of your account can be used at any accredited college or university.

The contributor stays in control of the account. You decide when withdrawals are taken and for what purpose. Most plans even allow you to reclaim the funds for yourself any time with a 10% penalty plus the payment of income tax. You can contribute up to $230,000 per beneficiary in many state plans. Generally, there are no income limitations or age restrictions.

Washington, DC College Savings Plan

DC College Savings Plan
Earnings are accumulated tax-deferred and federal-tax-free if used for qualified college expenses

Maryland College Savings Plans

Maryland Prepaid College Trust
Maryland College Investment Plan

Earnings are tax-free when used toward eligible college expenses. You can deduct up to $2,500 of contributions each year from Maryland income per account. Contributions in excess of $2,500 per account can be deducted in future years until full amount of payments has been deducted. Earnings are federally tax-free when used toward eligible college expenses through 2010.

Virginia College Savings Plans

Virginia Prepaid Education Program
Virginia Education Savings Trust
College America 529 Savings Plan

Distributions from 529 accounts that do not exceed the amount of adjusted qualified higher education expenses (tuition, mandatory fees, certain room and board costs, and equipment and supplies required for enrollment) are not taxable through December 31, 2010.