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The College Solution: A Guide for Everyone Looking for the Right School at the Right Price by Lynn O’Shaughnessy

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529 Nuts and Bolts

When you invest money in a 529, it’s protected from federal income taxes and almost always state taxes as well. As long as the cash remains inside the account, you don’t have to worry about taxes. It’s also usually, but not always, a nonissue once you begin spending the money on college bills.

When your child enrolls in college, you can pull the cash out and use it for qualified college expenses, such as tuition, room and board, fees, supplies, books, and equipment. You can only use 529 money to pay for a computer if a school requires students to have one. Most states, but not all, allow 529 proceeds to pay for undergraduate and graduate school.

Nearly three dozen states also offer their residents another attractive tax break. ...

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