In personal finance, an account designed for education savings with special U.S. tax treatment is a 529 plan.
The plans are named after Section 529 of the Internal Revenue Code. States, state agencies, and educational institutions can sponsor them, and their rules, investment menus, fees, and tax benefits differ. The two main types are education savings plans and prepaid tuition plans.
Withdrawals used for qualified education expenses can receive favorable federal tax treatment. Qualified expenses may include eligible higher-education costs, and rules have expanded over time. Nonqualified withdrawals can trigger taxes and an additional penalty on earnings, subject to exceptions.
A 529 plan is not the same as a retirement plan. Contributions are not federally deductible merely because they enter the account, though some states offer state-tax benefits.