Accounts & CustomersQuestion 74 of 125
A 529 college savings plan offers which key tax advantage?
a.Federal tax deduction for all contributions
b.Tax-free withdrawals for any purpose
c.Guaranteed investment returns
d.Tax-deferred growth and tax-free withdrawals when used for qualified education expenses
Explanation
A 529 plan provides tax-deferred growth and federal-tax-free withdrawals when funds are used for qualified education expenses; some states also offer a state tax deduction for contributions. Nonqualified withdrawals of earnings are taxed and subject to a penalty.
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