If you’re saving for college, consider the Section 529 plan — a tax free college savings plan.

The 529 plan is operated by a state or educational institution to help taxpayers save money to fund college expenses. An educational institution is generally any post-secondary schooling, including colleges, universities, and vocational schools.

Although you can’t deduct contributions on a federal level (some states do offer tax incentives for contributing), earnings are exempt from federal income tax. Typically, earnings are not subject to state income tax either, as long as earnings are used to pay qualified expenses (such as tuition, mandatory fees, books, equipment, supplies and, generally, room and board).

Aside from being virtually tax-free, here are some other reasons to consider utilizing the 529 plan to save for college:
They usually offer high contribution limits, and there are no income limits for contributing.
There’s generally no beneficiary age limit for contributions or distributions.
You can control the account, even after the child is of legal age.
You can make tax-free rollovers to another qualifying family member.
Finally, 529 plans provide estate planning benefits: A special break for 529 plans allows you to front-load five years’ worth of annual gift tax exclusions and make up to a $70,000 contribution (or $140,000 if you split the gift with your spouse).

The biggest downside may be that your investment options — and when you can change them — are limited. If you’re wondering if this savings plan is for you, ask our team of tax experts for more information on 529 plans and other tax-smart strategies for funding education expenses.