Use Your Savings at Certain Schools in the U.S. and Abroad
You can use your Texas College Savings Plan account to pay for qualified higher education expenses at most accredited institutions in the U.S., including vocational schools, two-year and four-year colleges and universities, graduate schools, and some foreign institutions.
Choose Your Beneficiary
Put money away for future qualified higher education expenses — whether for your child, grandchild, relative, friend, spouse, or even yourself.
Control and Flexibility
Because the account is in your name, you retain control over when and how the savings are used. You decide when and how much to contribute and when to make withdrawals. You can even change beneficiaries among qualified family members without penalty. You should consult your tax advisor to determine whether this may create a taxable gift.
If the beneficiary receives a scholarship, funds up to the amount of the tax-free scholarship may be withdrawn without penalty. Ordinary federal and any applicable state income tax would be owed on any investment earnings included in gross income.
Use Your 529 Account for K-12 Tuition, Student Loan Repayment or Participation in a registered apprenticeship program
Under Section 529 of the Internal Revenue Code, assets in the Account can also be withdrawn on a tax-free basis for any of the following purposes:
- Fees, books, supplies and equipment required for the participation of a designated beneficiary in a Registered Apprenticeship Program;
- up to $10,000 per year of tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school as determined under applicable state law; and
- up to $10,000 in amounts paid as principal or interest on any Qualified Education Loan of the designated beneficiary or a sibling of the designated beneficiary.
The $10,000 limitation for public, private, or religious schools applies on a per-student basis, rather than a per-account basis. Although an individual may be the designated beneficiary of multiple accounts that individual may receive a maximum of $10,000 in distributions free of federal tax per taxable year, regardless of whether the funds are distributed from multiple accounts. Similarly, the $10,000 aggregate limitation on Qualified Education Loan Repayments applies on a per-student basis regardless of whether the funds are distributed from multiple accounts.
Before making contributions or withdrawals from the Plan for qualified expenses at K-12 Schools, Registered Apprenticeship Programs, or Qualified Education Loan Repayments, Account Owners should consider that (i) the Investment Portfolios within the Plan were designed for college savers (e.g., persons saving for undergraduate and graduate school) not saving for qualified expenses at K-12 Schools, Registered Apprenticeship Programs, or Qualified Education Loan Repayments, and therefore Account Owners should take into account their investment horizon, and (ii) the information presented is based on a good faith interpretation of the statutory language.
Recent tax reform legislation changes allowing for payment of K-12 tuition were on a federal level, and the tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state as well as penalties. The account owner should consult with a tax or legal advisor before using the plan for K-12 tuition.