529 Plan tax benefits
Save for college, save on taxes. This is a major benefit of opening a CollegeInvest 529 Plan.
Colorado’s 529 tax deduction
For Colorado taxpayers, contributions to ANY CollegeInvest savings account are eligible for a deduction from your Colorado state income tax return1.
- For the 2023 tax year, the deductions are limited to $20,700 per taxpayer, per Beneficiary for single filers, or $31,000 per tax filing, per Beneficiary for joint tax return filers.
- For the 2024 tax year, the deductions will be increased to $22,700 per taxpayer, per Beneficiary for single filers, or $34,000 per tax filing, per Beneficiary for joint tax return filers.
Earnings grow tax-free
Earnings grow tax-free for both federal and state as long as your savings are used for eligible expenses2. Qualified expenses include tuition and required fees, room and board or certain off-campus rentals, books and supplies, computers and printers, internet access, and more (see FAQs).
Other savings vehicles, such as mutual funds, are generally subject to annual income taxes and/or the capital gains tax at withdrawal.
Anyone can contribute, and everyone benefits
Anyone can contribute directly to your account (mom and dad, brother-in-law, or uncle) and they can take the income tax deduction as well (if they’re also a Colorado taxpayer).
Did you know you can make a gift to anyone else’s CollegeInvest account and get the Colorado tax deduction for yourself? If you make a contribution and plan to claim the deduction on your Colorado income tax form, use our secure form to let us know.
1 Deductions are subject to recapture in subsequent years in which nonqualified withdrawals are made.
2 The earnings portion grows tax-free while in the account and subsequently used for qualified expenses. The earnings portion of nonqualified expenses are subject to state and federal income taxes, as well as a 10% federal penalty.
Frequently asked questions about 529 tax benefits:
What are the qualified expenses for 529 savings plans?
- Tuition and required fees
- Required books and supplies
- Certain room and board expenses or off-campus rentals
- Computers (desktops, laptops, or tablets), peripheral equipment (including printers, scanners, monitors, keyboards, and mice) used solely by the student
- Internet access for primary use by the student, excluding bundled costs of phone, cable, or pay TV services.
What if I can’t use the funds?
Nonqualified withdrawals are subject to federal and state income tax on the earnings portion and a 10% penalty on the earnings portion. State tax deductions may also be subject to recapture in subsequent years.
There are two options to avoid penalties:
- Change your Beneficiary to another family member, or yourself
- Leave the funds in the account for a use at a later time
What if my student gets a scholarship?
You can use your funds to cover other eligible expenses like room and board, books, supplies, computer/computer equipment, software, or internet access that some scholarships don’t cover.
You can change the Beneficiary to another family member, or even yourself.
Simply leave the funds in the account for use for other eligible higher education expenses at a later time.
Or, you may withdraw funds from your account equal to the scholarship amount without incurring the 10% federal penalty on the earnings portion. The earnings portion of your withdrawals may still be subject to state and federal income taxes. (You should carefully read the Plan’s Plan Disclosure Statement, or consult a tax advisor for your specific situation.)
How do I report contributions to a CollegeInvest 529 Plan?
If you made a gift contribution to someone else’s CollegeInvest account and are planning to claim the deduction on your Colorado income tax form, complete this secure form. CollegeInvest will share the information you provide with the Colorado Department of Revenue.
More 529 plan benefits:
Flexibility
When we talk with parents and grandparents about saving for college, flexibility is at the top of their concerns. It’s also the most inherent benefit of 529 savings plans.
Control
You as the Account Owner control the number of accounts, the beneficiaries, how much to save, what you pay for and when, and more. With the flexibility to change any of these when YOU want to.
Affordability
No, you don’t have to be a millionaire (or related to one) to have a CollegeInvest account. We want accessibility for all parents and grandparents to save for their education goals.