Education Planning Common Questions

I know that qualified withdrawals from college savings plans are now exempt from federal income tax. But what about state taxes?

Answer:

Although qualified withdrawals from college savings plans won't be taxed on your federal income tax return, state income tax treatment may differ. Often, state income tax benefits (e.g., tax-free treatment of qualified withdrawals) are provided to in-state residents who invest in their state's 529 plan. (These benefits are not extended to nonresidents.) You'll need to check the laws of your state, though, because some states will tax the earnings, and some won't.

GE 52225 (12/09)

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.

If you are investing in a 529 plan outside of your state of residence, you may lose available state tax benefits. Make sure you understand your state tax laws to get the most from your plan.

529 plans are subject to enrollment, maintenance, administration/management fees and expenses. 529 plans are subject to fluctuation in value and market rise, including loss of principal.

Investors should consider the investment objectives, risks, charges, and expenses of 529 plans carefully before purchasing. More information about 529 plans can be found in the issuer's official statement. Please read the official statement carefully before investing.

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