While we are providing general information about the Florida 529 savings plans, please consult the Plan Description and Participation Agreement for more detailed information and facts about the plan. Nothing within this article should be construed as investment advice.

529 Plan: Florida College Savings Plans

A 529 plan is a savings plan, with tax benefits, that encourages education savings for qualified education expenses – college, vocational, or other post-secondary learning

Unlike a traditional savings account or bank account, your money grows tax-deferred in a 529 account and qualified distributions are federal tax and state tax free.

Different states have different state plans with different investment options and different benefits. You can enroll in any state’s 529 plan that accepts non-resident enrollment. 529 plan funds can be applied to in-state schools or out of state schools, public or private institutions.

Any 529 plan can be linked to the Upromise rewards service. Earn an extra $25 bonus when you connect a 529 account to your Upromise profile.

Florida has two plans: the Florida 529 College Savings Plan and the Florida Prepaid College Plan.

The Florida 529 College Savings Plan or Florida 529 Savings Plan is a direct-sold plan that comes with fees ranging from 0.39% – 0.75%. It has higher fees than some other direct-sold plans, but has no minimum contribution amount and a high maximum of $418,000. It is available to any state residents, not just Florida residents.

Funds in this 529 savings plan can be used to cover tuition and qualified higher education expenses at schools nationwide. You’re not restricted to Florida colleges and schools.

The Florida Prepaid College Plan, however, is a college savings program available to only Florida residents. Some people refer to it as a prepaid tuition plan. It attempts to limit the risk of increasing college costs. With this plan, you’re paying for future college costs at today’s prices.

You must be a Florida resident to enroll in the Florida Prepaid Plan. These plan funds can only be used for tuition at in-state colleges and universities. If you know that your child will be going to school in-state, this could be a good option to lock current tuition prices against the future cost of tuition inflation. You can find more information about this 529 option at the the Florida Prepaid College Board website at myfloridaprepaid.com.

What are some Florida 529 tax benefits and advantages?

Funds you invest in a 529 plan grow tax-deferred. And funds that the student eventually withdraws from the plan towards qualified educational costs are free from federal taxes. These federal tax benefits make the 529 plan an extremely attractive option for most families.

A common misconception is that these 529 plan assets will disqualify your child from financial aid. On the contrary, 529 plan funds are treated more favorably in the financial aid formula than other savings in your child’s name through a custodial account such as an UTMA/UGMA. This is because assets in a child’s 529 plan belong to the parent not child, and FAFSA (Free Application for Federal Student Aid) gives preferential tax treatment to assets belonging to a student’s parent versus the student.

If your child is an Einstein or football star, and manages to score a free ride to school, you can still repurpose those funds. You can take out an amount equal to the scholarship fund amount from the 529 plan without incurring the 10% penalty tax fee you’d normally have to pay on funds not going to qualified education costs. (You would have to pay regular ordinary income taxes on earnings, but there would be no penalty. Alternatively, you can leave the funds in a 529 plan to be used at a later date by this beneficiary or a direct relative of the original beneficiary.)

And for many, a 529 plan can be used to transfer wealth. Contributing to a 529 plan lets grandparents or other contributors reduce the size of their taxable estate while helping them fund a grandchild’s or family member’s education. It’s even possible to make five years worth of contributions in a single year, up to $75,000 (or $150,000 for married couples) and still get the gift tax exclusion.

Is a 529 plan tax deductible in Florida?

No, Florida does not offer tax deductions for 529 plans. While contributions are not tax-deferred when they are put into the plan, there is tax benefit when they are withdrawn later on down the road by the student.

For questions about federal income tax benefits as they relate to your specific financial situation, consult a qualified tax professional.

What happens to a Florida 529 Plan if not used?

There is no time in which the funds within a Florida 529 plan need to be withdrawn. Unused funds can remain in the account and continue to grow tax-deferred.The account owner may also choose to change the beneficiary, without penalty, to an individual who is a member of the original beneficiary’s family and a U.S. citizen. This is not limited to immediate family members; funds can be transferred to cousins, nieces, nephews, and other close relatives. The account owner can close the account if not used, but funds in the account will be subject to federal and state income tax as well as a 10% penalty on the account earnings.

And as outlined earlier in this article, 529 plans allow the account owner to withdraw the amount a beneficiary receives in scholarships without incurring the 10% penalty.

Keep in mind that having leftover or unused funds in a Florida 529 savings plan is uncommon. A 529 plan can be used for tuition at eligible educational institutions and related educational expenses including: student fees, health fees, athletic fees, lab fees, books, and room and board.

Can a Florida 529 Plan lose money?

Yes, a 529 plan is an investment plan with different types of investment options. The investment options offer different levels of market risk. Speak with a qualified financial advisor about different investment portfolio options.

Florida, like many other states, does not offer an FDIC insured 529 college savings plan. Mutual funds, stocks, and bonds are similarly not FDIC insured.

Do I need a Florida 529 Plan for every child?

You don’t need a Florida 529 plan for each child but you may find it easier to administer if you do. You can only have one named beneficiary on a Florida 529 plan. The risk and mix of equities to fixed income of certain investment options is determined by the age of the beneficiary. For this reason, you may want to have a different 529 plan for each child.

You may be interested to know that multiple people can open accounts for the same beneficiary.

Can a Florida 529 plan be used to pay off student loans, apprenticeships, and K-12 private schools?

Florida 529 plans can be used to pay tuition at K-12 private schools and to pay student loans up to $10,000 annually. 529 plans can also be used to pay for registered apprenticeship programs.

How do financial aid and scholarships affect a Florida 529 plan?

A 529 plan can affect financial aid, but the impact is dependent on the account owner and their tax situation, not the beneficiary.

If the account is held by the parent or guardian of the student, funds within are considered parental assets. The Expected Family Contribution (EFC) calculation for parent assets is a maximum of only 5.64% versus 20% for the students assets.However, if the 529 plan is held by a grandparent or extended family member, while the assets are not taken into account for the FAFSA EFC, distributions from these accounts qualify as student income, which is assessed at 50%.

529 accounts do not affect merit-based scholarships. Other scholarships may depend based on the school.

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529 Plan Basics by State

Check out these College Savings: 529 Plan Basics by State

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