What is a State Tuition Section 529 plan ?

Named after IRS Code Section 529, it is a qualified state tuition plan.
A contribution to a qualified plan is treated as a completed gift passed from a contributor to a beneficiary. Contributions are eligible for the annual gift tax exemption of $13,000. Married couples can gift up to $26,000 a year.
Investment earnings within college savings programs grow federal income tax deferred.
The investment earnings are taxed at the student's rate when withdrawn for college tuition and room and board. You can use the College Savings Program assets to pay any type of qualified higher education expenses such as tuition, fees, room and board, books and supplies.
College Savings Program funds can be used at any accredited post-secondary public or private school eligible to participate in federal student financial assistance programs anywhere in the U.S. This includes any 2 and 4 year undergraduate programs, technical schools plus graduate and professional schools.
Funds can be withdrawn without penalty if the beneficiary receives a scholarship (withdrawals can be made up to the scholarship amount) or in the event of the death or disability of the beneficiary. Ordinary income taxes will be owed on any investment earnings.
State tax treatment of contributions may vary. You can take money out of a 529 plan at any time. Your investment earnings are subject to income taxes at the account owner's tax rate plus a 10% federal tax penalty. State income tax treatments on 529 Plan's nonqualified withdrawals vary by state.
There are pros and cons to this tax strategy. These accounts may be considered the child's asset when determining financial aid.