Does Tennessee have a 529 plan?

The Tennessee Department of Treasury launched TNStars, Tennessee’s own 529 College Savings Program, in order to help more Tennesseans achieve the level of education necessary for a successful career.

How does a 529 college savings plan work?

A 529 college savings plan works much like a Roth 401(k) or Roth IRA by investing your after-tax contributions in mutual funds, ETFs and other similar investments. Your investment grows on a tax-deferred basis and can be withdrawn tax-free if the money is used to pay for qualified higher education expenses.

Are 529 contributions tax deductible in Tennessee?

No. According to the Tennessee Department of Revenue(DOR), “Tennessee does not offer a tax deduction or credit for distributions from a 529 Plan.”

Do I have to attend a college in Tennessee to use the money I saved in the plan?

The money you save with TNStars College Savings 529 Program does not have to be used at a Tennessee college or university. In fact, TNStars funds may be used at any qualified higher educational institution in the United States or abroad, so long as that institution is willing and able to accept federal financial aid.

Does every state have a 529 plan?

State participation is nearly universal; 49 states and the District of Columbia each offer at least one 529 plan. Most states have established policies on 529 plans regarding (state) tax-free growth, state income tax deductions, matching state funds, account limits and penalties for unqualified expenses.

What if my family saves money in the plan and then I decide not to attend college?

If you have a 529 college savings plan and your child is not planning to attend college, don’t panic! In most cases, withdrawals from a 529 plan that are not for qualified educational expenses are subject to a 10% penalty and taxes on earnings.

Can 529 be used for high school?

Up to $10,000 annually per student, in aggregate from all 529 plans, can be withdrawn free from federal tax if used for tuition expenses at a public, private or religious elementary, middle, or high school.

What happens to 529 if child goes out of state?

You are not required to change or terminate your 529 plan if you move to another state. You can keep the 529 plan in the same state. The main difference is that you will no longer be able to claim a state income tax deduction or tax credit based on contributions to the previous state’s 529 plan.

What happens to 529 plan if child does not go to college?

If assets in a 529 are used for something other than qualified education expenses, you’ll have to pay both federal income taxes and a 10% penalty on the earnings. (An interesting side note is that if the beneficiary gets a full scholarship to college, the penalty for taking the cash is waived.)