Benefits

Nationwide, 529 plans have become the primary way that families save for education after high school. With VT529, saving is simple, and the plan offers tax advantages, especially for Vermont taxpayers. As Vermont’s official 529 college savings plan, VT529 is the only 529 college savings plan that qualifies for the 10% Vermont state income tax credit on annual contributions or gifts.

Low Minimum and No Maximum Contributions

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automatic contributions

You choose the schedule — monthly, quarterly, yearly, and more.

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one-time contributions

By electronic funds transfer (EFT), check, or recurring ACH.

There is no limit on contributions per beneficiary as long as the total balance of all accounts in the plan for that beneficiary does not exceed $550,000. Accounts may continue to accrue earnings even if they have reached the maximum account contribution limit.

Low Plan Fees

VT529 has low plan fees and no enrollment fees. There is a low program management fee of 0.13% per year and low underlying investment fees between 0.00%-0.03% per year on the investments in your VT529 account. For details, please see our FAQ about fees and expenses.

Less impact on financial aid

Federal financial aid formulas dedicate a fairly small portion of the parents’ assets toward the student’s college costs — a maximum of 5.64% per year. A student’s assets, in contrast, are typically assessed at a rate of 20% in the financial aid formula for higher education. Assets in a 529 plan in which a parent or a student is the account owner are reported on the Free Application for Federal Student Aid (FAFSA) as an asset of the parent and are thus assessed at the parent’s rate rather than at the student’s rate.

Anyone can open an account

Any individual—parent, grandparent, relative, and friend — who is a U.S. citizen or resident alien and has a Social Security Number or Tax Identification Number may open a VT529 account and contribute to a beneficiary. You can even open an account for yourself. Vermont state residency is not required. A trust, estate, corporation, non-profit, or government entity can also open an account and contribute on behalf of a beneficiary.

Anyone may contribute to an account

Your account automatically comes with a personal gifting page. Whether for a birthday, baby shower, holiday, graduation, or just because, your gift page allows your friends, family, and community to help with your savings goals.

Many ways to contribute

You may set up automatic contributions from your bank account, sign up for payroll deduction with your employer, or make contributions online or by mail whenever you want to. You can also roll over funds from another state’s 529 program or another college savings investment, such as a Coverdell ESA or UGMA/UTMA.

Learn more about contributions

No time limit for using funds

The money you accumulate can be used for a beneficiary’s qualified education expenses for undergraduate, graduate, and non-degree education at any time during the account owner’s lifetime. You can name a Successor Owner, who will become the account owner if you die.

Money can be transferred to another beneficiary

You may change the beneficiary at any time to another member of the previous beneficiary’s family. The account owner retains control over the account even when beneficiaries are changed.

Money can be withdrawn to repay student loans

Up to $10,000 can be used per the lifetime of a beneficiary to repay student loans for post-secondary education.

Vermont State Income Tax Credit

As Vermont’s official 529 college savings plan, VT529 is the only 529 plan that qualifies for a Vermont state income tax credit. It is the responsibility of the account owner and any contributor to VT529 to maintain records necessary to respond to any questions from the Internal Revenue Service or the Vermont Department of Taxes related to contributions.

A state income tax credit of 10% of the first $2,500 contributed to VT529 per beneficiary per tax year is available to any Vermont taxpayer (or, in the case of a married couple filing jointly, 10% of the first $5,000 contributed per beneficiary) – a tax credit worth up to $250 per beneficiary ($500 per beneficiary for married couples filing jointly). Gifts made by a Vermont taxpayer to any VT529 account are also eligible for the credit. 
Rollovers from another state’s 529 plan into VT529 are also eligible for the tax credit on the contributions portion of the rollover (not on the earnings portion). The funds must remain in VT529 for the remainder of the tax year in order to claim the tax credit.

For details and examples, including information on non-qualified withdrawals, see the Vermont Department of Taxes Technical Bulletin (TB-66).

Learn how to claim the Vermont income tax credit

Federal tax reform info: The Internal Revenue Code includes provisions related to 529 plan accounts. See the Disclosure Booklet for details. In 2022, Vermont tax law was updated to add two new allowable uses of funds withdrawn from a VT529 account without adverse impact on the Vermont income tax credit: (1) for apprenticeship programs registered and certified with the U.S. Secretary of Labor and (2) for repayment of up to $10,000 per the lifetime of a beneficiary in student loans for post-secondary education at an approved postsecondary education institution. (See the VT529 tax credit information on the VT Tax website.) Vermont tax law currently does not treat a rollover to a Roth IRA or a withdrawal used as an allowable use for K through 12 education expenses. Please consult your tax advisor for how this may affect your personal Vermont tax situation.

Tax Advantages of VT 529 Plans

Tax-free earnings

All contributions are made after-tax. Any earnings are free of federal and state taxes when used for qualified expenses.

Tax-free withdrawals

Withdrawals used for qualified higher education expenses – including eligible undergraduate, graduate, trade, technical, or non-degree study – are exempt from federal and state tax.

No income limitations

Tax benefits are available regardless of income. There are also no income limitations on a person’s ability to open or contribute to a VT529 account.

Federal estate and gift tax benefits

Contributions to VT529 may reduce the taxable value of your estate for an annual federal gift tax exclusion of $19,000 per donor ($38,000 for married contributors), per beneficiary.

IRS Publication 970, Tax Benefits for Education, is a useful resource for individual taxpayers who have questions about 529 plans, referred to as Qualified Tuition Programs (QTPs) in the IRS code. See chapter 8 of the document for specifics and tips.