An account can be established by an individual, a UGMA/UTMA custodian, certain legal entities, or a trust. There are no income or residency requirements.
Your investment professional can guide you through the steps to get enrolled.
Anyone, including yourself, can be named as a beneficiary. There are no age, income, or residency limitations. Each account can have one designated beneficiary.
Parents, grandparents, other relatives—anyone, really—can contribute to a CollegeCounts 529 Fund account on behalf of the beneficiary.
Contributions to the CollegeCounts 529 Fund are Alabama tax deductible up to:
The amount contributed by an Alabama taxpayer during a tax year is deductible from Alabama income in an amount not to exceed $5,000 for a single return or $10,000 for a joint return for that tax year. If you also contribute to another Alabama 529 account, your maximum total deduction on all contributions is still $5,000 per year ($10,000 for married couples filing jointly). Rollovers to another state’s 529 plan or nonqualified withdrawals may be subject to recapture. For additional information see the Tax Q&A.
The plan is very flexible. You can contribute by:
Yes. You can complete a rollover form to transfer assets from another 529 plan and gain the benefits of the Alabama state income tax deduction. A same-beneficiary rollover/transfer is allowed once in a 12-month period. Additional transfers are allowed but require a change of beneficiary. For additional information see the Tax Q&A. Check with your investment professional for further assistance with rollovers.
Each year an independent public accountant selected by the Program Manager will audit the Plan. The auditors will examine financial statements for the Plan. The Board may also conduct audits of the Program and Trust.
You can download copies of the latest audits by clicking here:
No. Many beneficiaries will attend Alabama schools; however, funds may be used at eligible schools nationwide and some foreign schools too.
Any postsecondary educational institution that meets accreditation criteria and is eligible to participate in Federal Student Aid programs is eligible. This includes institutions such as public and private colleges and universities; vocational, trade, technical, and professional institutions; and even some foreign schools. Check out a listing of eligible schools from the Department of Education.
Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses incurred by students who are enrolled at least half-time; the purchase of computer or peripheral equipment, computer software, or Internet access and related services, if used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution; and certain expenses for special needs services needed by a special needs beneficiary.
Make sure you keep receipts and invoices for any qualified college expenses in your tax files. CollegeCounts does not require any proof of your withdrawals, but you will want to have documentation of your expenses in the event the IRS has questions. We also recommend that you match any withdrawals from your CollegeCounts 529 account in the same calendar year as you pay the actual qualified college expense.
Checks can be made payable to either the Account Owner, Beneficiary or School. Keep in mind that the recipient of the withdrawal will receive the 1099-Q tax reporting form regarding the withdrawal. The Account Owner will receive the 1099-Q for any withdrawals payable to them. The Beneficiary will receive the 1099-Q for any withdrawals payable to the Beneficiary or the School. As you plan to take withdrawals, keep in mind any potential tax consequences when determining how you would like the check issued.
PLEASE NOTE: The earnings portion of a non-qualified withdrawal is subject to federal income tax and 10% federal penalty tax. In addition, Alabama provides in the event of a non-qualified withdrawal an amount that must be added back to the income of the contributing taxpayer. The amount to be added back will be the amount of the non-qualified withdrawal plus 10% of the amount withdrawn (click here for additional information).
Make sure to consult with your tax professional regarding the best strategy when withdrawing funds. Your 529 withdrawals can be tax-free, but you should consider the various federal and state tax credits and deductions available as well. Typically you can use qualified college expenses for one tax credit, deduction, or tax-free 529 treatment. Generally you cannot “double dip” and use the same expenses for multiple tax credits, deductions, and tax-free withdrawal treatments from your 529. CONSULT your tax advisor for more information or advice.
If a student receives a refund after December 31, 2014, of qualified education expenses that were treated as paid by a qualified 529 distribution, the student can recontribute these amounts into a qualified 529 plan for which they are the beneficiary within 60 days after the date of the refund to avoid the need to figure the taxable part of the 529 distribution.