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IMPORTANT NOTICE
The Texas College Savings Plan is established and maintained by the Texas Prepaid Higher Education Tuition Board. The Texas Sunset Advisory Commission performs periodic reviews of most state agencies. The Commission is currently reviewing the mission and performance of the Board. For information on how to provide comments or suggestions to Sunset staff on the Board’s mission, operations or services, please click here.


Frequently Asked Questions


How Do I:

You can make a contribution any time online at My Account. Funds can automatically be transferred from your bank account on a regular basis using an Automatic Investment Plan (AIP).

You can request a withdrawal online at My Account or you can complete a Withdrawal Request Form and mail it in. Payments can be made directly to the educational institution, account owner or beneficiary. For details, please check the Plan Description and Savings Trust Agreement.

You can use the account maintenance features at My Account to:

  • Change Your Investment Options
  • Add or Change Successor Account Owner
  • Establish, Change or Delete your AIP
  • Change Your Elected Investment Allocation
  • Change Address or Phone Numbers
  • Alternatively, you can use the Account Maintenance Form to update your account

General

Named after Section 529 of the Internal Revenue code, state-sponsored 529 plans are investment plans that receive special tax benefits. Also referred to as qualified tuition programs, 529 plans are specifically designed to help families—regardless of income level—save for college expenses such as tuition, books, and room and board. Investments grow tax deferred, and qualified withdrawals are federal tax free.

All U.S. citizens and permanent resident aliens 18 years of age or older. There are no income or state residency restrictions. Accounts can also be established by a corporation, partnership or trust; a state or local government, or tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code; or a custodian under a UGMA/UTMA account.

Any U.S. resident. For instance, you can set up an account for your child, grandchild, spouse or someone who is not related to you. If you are planning to attend college or graduate school, you can open an account for yourself.

A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established.

The Texas College Savings Plan is open to all U.S. citizens or permanent resident aliens 18 years of age or older, with a valid social security number, without any state residency restrictions.

No. The money can be used at any accredited public or private post-secondary institution in the United States and abroad. This includes most two-year and four-year colleges and universities, vocational and technical schools, graduate schools, professional, medical and law schools.

Many states offer similar college savings programs. You should compare the benefits carefully before choosing a plan. Keep in mind that many plans offer additional state tax or other benefits only to residents of the state offering the plan.

Most schools assigned a federal school code by the Department of Education are eligible. We suggest you perform a Federal School Code search and confirm with the school.

Qualified higher education expenses means tuition, fee, books, supplies, and equipment required for the enrollment and attendance of a designated beneficiary at an eligible educational institution; certain room and board expenses; expenses for a special needs beneficiary, which are incurred in connection with such enrollment or attendant; expenses for the purchase of computer or peripheral equipment, computer software, and Internet access and related services, if such equipment, software, or services are to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution, and expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

Effective January 1, 2018, this expansion of Qualified Higher Education Expenses permits Account Owners to withdraw up to $10,000 per year from multiple Section 529 college savings accounts for a designated beneficiary’s tuition expenses for K-12 Schools free of federal taxes. This $10,000 limitation applies on a per-student basis, rather than a per-account basis and does not apply to prepaid plans. Although an individual may be the designated beneficiary of multiple accounts, that individual may receive a maximum of $10,000 in distributions per year free of federal tax, regardless of whether the funds are distributed from multiple accounts.

An important factor for determining federal financial aid eligibility is the expected family contribution. When figuring the role of 529 plan assets toward that contribution, the following points are considered:

  • If the child’s parent is the account owner, the account assets will be treated as assets of the parent.
  • If a dependent child is the account owner, or the beneficiary of a Texas College Savings Plan account holding assets transferred from a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account, the account assets will not be counted.

If your beneficiary receives a scholarship for higher education expenses, you can withdraw an amount equal to the value of the scholarship from your account(s) or account. Earnings on the amount you withdraw would be taxed at your tax rate but will not be subject to the additional 10% federal tax.

As the account owner, you always have control of your withdrawals. If the beneficiary chooses not to attend college, you have three options:

Keep the funds in the account. Since there are no age restrictions on the investments, they will be available in future years if the beneficiary changes his or her mind about school.

Change the beneficiary. You can change your beneficiary at any time without tax implications, provided that your new beneficiary is a qualified family member. You should consult your tax advisor to determine whether this may create a taxable gift.

Make a nonqualified withdrawal. Earnings will be subject to federal income taxes and any applicable state tax, as well as an additional 10% federal penalty unless you qualify for an exception to the penalty.

Coverdell Education Savings Accounts offer similar tax advantages, but contributions are limited to $2,000 per year which may not be sufficient to adequately fund a college education. In addition, Coverdell accounts restrict who can contribute based on income levels.

Contributions and Withdrawals

You can open a Texas College Savings Plan 529 account with as little as $25, and subsequent contributions can be as small as $15 when funding an account through an Automatic Investment Plan (AIP) or payroll deduction. The maximum contribution amount is $370,000.1

You can take money from your account at any time. However, if the money is not used to pay for qualified higher education expenses, earnings will be subject to ordinary federal income tax and any applicable state tax, as well as an additional 10% federal penalty unless you qualify for an exception to the penalty.

The additional 10% federal tax penalty does not apply to the following distributions:

  • Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary;
  • Made if the designated beneficiary becomes disabled in accordance with federal law;
  • Made on account of the attendance of the designated beneficiary at a U.S. military academy (to the extent that the amount of the distribution doesn’t exceed the costs of advanced education as defined in section 2005(d)(3) of title 10 of the U.S. Code attributable to such attendance);
  • Included in income because the designated beneficiary received a tax-free scholarship or fellowship grant, veterans’ educational assistance, employer-provided educational assistance or other nontaxable payments received as educational assistance (to the extent the distribution isn’t more than the scholarship, allowance or payment);
  • Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit.

Investment Options

You may view Recent Total Returns, Annual Average Returns or Prices.

Should your goals or needs change, you have the flexibility to rebalance your existing investment options twice per calendar year to different portfolios available within the Program. See the Plan Description and Savings Trust Agreement for details.

Rollover and Transfer

Yes. You must first redeem your current UGMA/UTMA account. 529 accounts opened with assets from a UGMA/UTMA account are subject to additional restrictions. Please see the Plan Description for more details.

Yes, the IRS allows a tax free rollover from a 529 account to another 529 account of the same beneficiary or a Member of the Family of the beneficiary if these requirements are satisfied:

  • The rollover must occur within 60 days of the distribution;
  • Only one rollover from a 529 plan to another 529 plan per twelve-month period for the same beneficiary is allowed. This restriction does not apply to a member of family of the beneficiary.

For further details on rollovers from a 529 plan to another 529 plan account, see the Plan Description and Savings Trust Agreement. Complete our Rollover Form.

Yes, the IRS allows a tax free rollover from a 529 account made after December 22, 2017 and before January 1, 2026 to an ABLE account of the designated beneficiary of that 529 account or of a member of the family of that designated beneficiary if these requirements are satisfied:

  • The rollover must occur within 60 days of the distribution and
  • The rollover amount when added with all other ABLE contributions for the taxable year that are subject to the annual gift tax exclusion must not exceed that limit. For 2018, the annual gift tax exclusion is $15,000 per year for single filers ($30,000 if married filing jointly).

For further details on rollovers from a 529 plan to an ABLE account, see the Plan Description and Savings Trust Agreement. Complete our Rollover Form.

1 The maximum contribution limit is currently $370,000 per Designated Beneficiary aggregated across all accounts in Texas-sponsored 529 plans and cannot exceed this limit. Accounts that have reached the limit may continue to accrue earnings, but additional contributions, including those from Rollovers, are prohibited. See the Plan Description and Savings Trust Agreement for details.




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