What is a 529 college savings plan?

You have three options:

You can simply leave the funds in the account should he/she decide to go back to learning. You can change the Beneficiary to another family member, or even yourself.

Or, you can withdraw the funds, subject to the tax consequences for nonqualified withdrawals. Generally, the earnings are subject to federal and state income taxes, a 10% penalty, and the possible recapture of any state income tax deductions.

You have four options:

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.)

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.

You can change the investment option for all or a portion of your assets for any reason, no more than two times during any calendar year, without incurring tax consequences or penalties.

For example: You currently have $5,000 in a conservative fund option but want to move the money to an aggressive fund option, possibly because the stock market may be stronger at the time. You are allowed to change your investment option (called a reallocation) twice per calendar year.

This limitation applies on an aggregate basis to all accounts having the same Account Owner and the same Beneficiary.

Regarding Account Transfers: You can transfer assets from one 529 plan to another (thereby changing investment options) for the same Beneficiary once per 12 month period. (Check with your plan for any restrictions on moving accounts within a plan.)

Regarding a Change in Beneficiary: You may also make a reallocation anytime you change Beneficiaries, subject to limitations regarding changing a Beneficiary. (Carefully review your Plan Disclosure Statement.)

Please note, each situation is unique, and you should carefully review the Plan Disclosure Statement to understand the Plan’s limitations and the potential tax consequences. Or consult with your tax advisor for your specific situation.

Savings used to pay for qualified higher education expenses (within the same calendar year) are free from federal and Colorado state income tax. If you are not a Colorado resident and/or pay taxes in another state, you should check with that state or a tax advisor to determine the applicable state tax treatment.

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.

Colorado taxpayers who contribute to ANY CollegeInvest savings account are eligible for a deduction from their Colorado state income tax return:

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.