Also called Section 529 plans, these college savings plans have been established by almost every state, and some private colleges. You invest now to cover future college expenses, by contributing to a savings account or buying tuition credits redeemable in the future. Investments grow tax-free, and distributions to pay college expenses can also be tax-free. You may choose any state's plan, regardless of where you live.
Tip: Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American Opportunity Credit or the Lifetime Learning Credit.
