{ "media_type": "text", "post_content": "If college 529 fund isn’t used for qualifying educational expense, it is taxed as income plus 10% taxes. Where as if I just invest in mutual funds, I only pay capital gains tax when I sell to pay for education, right?", "post_id": "61a506d9a38738002928b824", "reply_count": 5, "vote_count": 1, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

If college 529 fund isn’t used for qualifying educational expense, it is taxed as income plus 10% taxes. Where as if I just invest in mutual funds, I only pay capital gains tax when I sell to pay for education, right?

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Correct. You are able to defer gains in the 529. Also if you don’t use it due to scholarship, the penalty does not apply, I believe.

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The other common benefit of 529 is that some states offer state income tax deductions. Together with the tax-free growth, they’re pretty compelling at least for part of the college savings strategy. My thinking, and what I have heard elsewhere, is that it’s better to err on the low side within the 529 to avoid the issues you mentioned, and make up any gaps with other funding sources (e.g. loans, current income, or liquidation of other investments).

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Can I invest in 529 to invest for my own MBA? If so, do you advise that?

Yes you can and yes I would

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I just invested on the low side for what college would cost. I assumed that if I had leftover (which I won’t) that I could save for grandchildren or work something out with one of my siblings to pay for a one of their kids. Since generally you are saving for a long time, the tax savings can be a lot.

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