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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. With certain restrictions, the money can also be used for K-12 tuition, registered apprenticeship programs and student loan repayment.

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. You should consider consulting with a tax or legal advisor to determine any such consequences.

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.

Section 529 of the Internal Revenue Code defines “qualified higher education expenses” as tuition, fees, books, supplies, and equipment required for a beneficiary’s enrollment or attendance at an eligible educational institution. The term includes computers and peripherals, software (except for non-educational sports, games, or hobby software), and internet service, provided they are used primarily by the beneficiary while enrolled at an eligible educational institution. Expenses for special needs services incurred in connection with enrollment or attendance at an eligible educational institution are also included in the definition.

For beneficiaries who are enrolled at least half-time at an eligible educational institution, qualified higher education expenses include reasonable room and board. The amount of room and board cannot exceed the greater of: (1) the allowance included in the “cost of attendance,” as defined under federal law, as determined by the eligible educational institution for the period; or (2) the actual invoice amount charged to the beneficiary for room and board, if the beneficiary resides in housing owned or operated by the eligible educational institution.

The following expenses are also treated as qualified higher education expenses under Code §529:

  • Up to $10,000 per year of your beneficiary’s K-12 tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school;
  • Fees, books, supplies, and equipment necessary to participate in a registered apprenticeship program; and
  • Up to $10,000 in amounts paid as principal or interest on any qualified education loan (as defined in Code §221(d)) of the beneficiary or a sibling of the beneficiary (“qualified student loan repayments”). Note that the state tax consequences of using 529 plans for K-12 tuition will vary by state and may involve taxes, penalties, and the recapture of tax deductions.

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. You should consider consulting with a tax or legal advisor to determine any such consequences.

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 $500,000.1

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 and Savings Trust Agreement 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 2022, the annual gift tax exclusion is $16,000 per year for single filers ($32,000 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. If you are planning on rolling over your Texas College Savings Plan Account to the Texas ABLE Plan, complete our Rollover Form.

1 The maximum contribution limit is currently $500,000 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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