Did you invest in a prepaid tuition plan? Is your child about to go off to college? Congratulations if you answered yes to both of these questions! You probably got a great rate of return and have some of your son’s or daughter’s tuition already paid. And here’s some more good news: all that investment growth you got from paying for college in the past will be tax free to you when you use the Plan to pay for college today. All prepaid tuition plans are 529 plans (except the Massachusetts Prepaid Plan, which derives its tax-free status from another section of the federal tax code) and share all of the tax benefits of 529 savings plans.
Unfortunately, using your prepaid tuition plan is not as simple as writing a check to the college. You’ll want to take some steps now so that you use the plan properly when the bill comes due.