Recommendations & StrategiesQuestion 65 of 110
Which statement about a 529 college savings plan is accurate?
a.Earnings grow tax-deferred and qualified education withdrawals are tax-free
b.Contributions are federally tax-deductible in all cases
c.Funds can be withdrawn tax-free for any purpose
d.Only the beneficiary may control the account
Explanation
A 529 plan allows investments to grow tax-deferred, and withdrawals used for qualified education expenses are free from federal income tax. Contributions are not federally deductible, though some states offer a state tax benefit. Non-qualified withdrawals of earnings are taxed and may incur a penalty.
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