At last count, 33 states
had college tuition programs in place, while another 8 states have enacted legislation
authorizing the implementation of a program but had not yet begun accepting contributions.
These programs generally fall into one of two categories, prepaid tuition plans and
It is of critical importance that a states college tuition
program meet the requirements of section 529 of the Internal Revenue Code defining a
"qualified State tuition program" or QSTP. QSTPs are sometimes referred to as
Section 529 plans. Even those states with programs that pre-date section 529 (enacted in
1996) are making changes to their programs necessary to comply with the requirements of
the new tax law.
In this chapter, the provisions of section 529 are described, including
the tax benefits made available to the taxpayer, the tax rules for withdrawals, and the
various qualification requirements.