Families in the United States often use 529 plans to save money for their children's college. But as globalisation grows, many people who are not US citizens may wonder if they can also use this way to save money. The good news is that people who don't live in the US can put money into a 529 plan.
Non-U.S. citizens who live abroad can still put money into a 529 plan for a child that is owned by a U.S. citizen or a legal alien relative.
Table of Contents
What is a 529 Plan?
A 529 plan is a special kind of tax-advantaged savings account for college costs. There are two kinds of 529 plans: plans that pay for college already and plans that save for college. Families can buy tuition credits at colleges and universities that take part in prepaid tuition plans. College savings plans, on the other hand, let families invest in a portfolio of stocks, bonds, and other securities. When the money is used to pay for qualified education costs, it can be taken out of both types of plans tax-free.
Benefits of a 529 Plan
Tax Advantages
One of the best things about a 529 plan is that it can help you save money on taxes. Contributions to the plan grow tax-free, and so do withdrawals for qualified education costs.
Easy to Manage
A 529 plan is easy to manage, which is another good thing about it. The person who owns the account can choose from different ways to invest, and the plan can be run online or with the help of a financial advisor.
Flexibility
A 529 plan also gives you options. The owner of the account can change the plan's beneficiary if they want to, and the money can be used for a wide range of college costs, such as tuition, room and board, and books.
Can Non-US Citizens Participate in a 529 Plan?
Yes, non-US citizens can join a 529 plan, but there are some rules and restrictions they need to know about. First, it's important to know that only states in the United States can offer 529 plans. This means that non-US citizens who want to open an account will need a valid Social Security number or taxpayer identification number.
A U.S. citizen or legal immigrant family member can help a child who is not a U.S. citizen and lives abroad by changing the beneficiary on a 529 plan. The beneficiary of a 529 plan can be changed at any time to a qualified family member without any tax consequences. The person who owns the 529 plan can name themselves as the beneficiary. Once the child moves to the U.S. and gets a Social Security Number or Individual Taxpayer Identification Number, the account holder can change the beneficiary to the child.
What 529 plans are available to resident aliens?
Most state-sponsored 529 savings plans are available to all U.S. citizens and permanent residents of legal age. But there are six plans that are only for people who live in the state:
- Connecticut Higher Education Trust (CHET) Advisor Plan
- Florida 529 Savings Program
- Louisiana START Saving Program
- New Jersey NJBEST College Savings Plan
- South Carolina Future Scholar 529 College Savings Plan (Direct-Sold)
- South Dakota CollegeAccess 529 (Direct-Sold)
Some families choose a 529 plan in their own state because they can get a deduction or credit on their state income tax for their contributions. But when choosing a plan, you should also think about things like fees and how well investments have done. Families with young children might get more money out of an out-of-state 529 plan with lower fees than from a state tax benefit.
Conclusion
A 529 plan can be a great way for people who are not US citizens to save money for their children's college education. There are some rules and restrictions to be aware of, but the tax benefits and investment options make it a good option to think about. Non-US citizens should talk to a financial advisor or tax professional to start using a 529 plan. This will help them understand the rules and requirements.
