Alright. Which way is it? I've read that contributions to a 529 grow tax-deferred (http://tinyurl.com/7q5zv), and I've read that contributions to a 529 are not tax-deductible (http://tinyurl.com/czxyo). So are the contributions a deduction or not?Both are statements are right. Contributions grow tax-deferred. You don't pay taxes on anything that takes place within the 529 until money is withdrawn from the 529. Then, if the money is used for eligible education expenses, the withdrawal is tax free. Contributions to a 529 are not tax-deductible at the federal level. You don't get an immediate benefit from contributing to a 529.Some states offer a deduction on the state income tax return for 529 contributions to that state's 529 plan.Ira
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