529 Plan

Full explanation

A 529 plan is a state-sponsored investment account designed for education savings. Contributions are made with after-tax dollars (no federal deduction, though many states offer a state tax deduction). Earnings grow tax-free, and withdrawals used for qualified education expenses — tuition, room and board, books, computers, and K-12 tuition up to $10,000/year — are completely tax-free. For 2026, unused 529 funds can be rolled into a Roth IRA for the beneficiary (up to $35,000 lifetime, subject to annual Roth contribution limits), provided the 529 has been open for 15+ years. There is no federal contribution limit, but contributions above the annual gift tax exclusion ($19,000 for 2026) may require a gift tax return.

Source: IRS Publication 970 — Tax Benefits for Education