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Yes, and therefore it has special tax advantages unavailable in other savings vehicles. For example, with SMART529 Select, withdrawals for qualified higher education expenses (tuition, fees, room, board, books, equipment and supplies required for attendance according to the IRS guidelines) are free from federal income tax. Non-qualified withdrawals are taxable as ordinary income to the extent of earnings, and may also be subject to a 10% federal tax penalty. Such withdrawals may have state income tax implications.
SMART529 Select’s low initial minimum investment requirement makes it accessible to just about any household budget. It only takes $250 per investment option to open an account, and additional contributions can be as little as $25 per option. (The annual maintenance fee is waived if you are enrolled in the Automatic Investment Program for $50 or more, and on account balances over $25,000). If you are a West Virginia resident, an account may be opened with an initial investment of $50 per account, and there are no minimum requirements for subsequent investments.
Most two or four year accredited colleges, universities, vocational, technical and graduate schools in the U.S., as well as a limited number overseas are eligible. To check if a U.S. institution is accredited, call the Federal Student Financial Aid Center at 1-800-433-3243.
If the beneficiary receives a grant or scholarship, that amount can be withdrawn from the account. If that money is not used for other qualified higher education expenses, the portion of the withdrawal that represents earnings will be subject to ordinary income taxes. But it will not be subject to a 10% federal income tax penalty. Proper documentation of the scholarship may be required.
As account owner you have three options: (1) Leave the money in the account, in case the Designated Beneficiary decides to attend school later; (2) Change the Designated Beneficiary to an eligible family member of the current beneficiary; or (3) Withdraw the money. In the event of a withdrawal, earnings will be subject to ordinary income taxes and possibly a 10% federal income tax penalty. Such a withdrawal may have state income tax implications.
The Account Owner has two options: (1) Change the Designated Beneficiary on the account to another eligible family member of the current beneficiary, or (2) Withdraw the account value. In that event, account earnings will be subject to ordinary income taxes.1
1 Please see the SMART529 Select College Savings Offering Statement for a definition of Eligible Beneficiary and eligible family member.
You should consider the following before you transfer from an a UGMA/UTMA account to SMART529 Select:
- Since UGMA/UTMA accounts are owned by the beneficiary, the SMART529 Select account must be opened with the child named as both account owner and designated beneficiary.
- The transfer may be a taxable transaction that would need to be reported, but future earnings would grow tax-deferred in the SMART529 Select account.
- An account with a child as account owner can only be funded with the proceeds of the UGMA/UTMA account and cannot be funded with a check written by a parent or other individual. Only money that is already in the child's name can be invested in the account.
To manage any potential problems, the money rolled over from your UGMA/UTMA account will be put into a new SMART529 Select account. This account will be closed to new contributions. You may then open another SMART529 Select account for the designated beneficiary without any concerns about whether the contributions come from investments that are in the designated beneficiary's name.
Qualifying expenses include tuition, fees, room, board, books, equipment (such as computers) and supplies required for attendance, according to the IRS guidelines. The amount that can be saved for each may be limited by IRS regulation (see the College Savings Offering Statement for more information).
- K-12 tuition expenses up to $10,000 per year*
- Repayment of qualified student loans or a maximum lifetime limit of up to $10,000. This includes amounts of repaid principal and interest on any qualified student loan of either a 529 plan designated beneficiary or a sibling of the designated beneficiary.**
- Apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act. Includes expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in a program.**
*Hartford Funds does not provide tax advice. Investors should work with a financial intermediary to select an appropriate investment option based on the investor's goals, particularly if the investor is considering using the assets for K-12 tuition. The SMART529 investment options were designed for saving for college, particularly the Age-Based Portfolios. Certain Portfolios may be more appropriate for saving for K-12 tuition than others. State income tax treatment varies by state. Please consult with a local tax professional for more information.
**State income tax treatment varies by state. Please consult with a local tax professional for more information.
Earnings in your account have the potential to accumulate on a tax-deferred basis until withdrawn. Qualified distributions are not subject to federal income tax. Any earnings are taxable upon distribution. Earnings on non-qualified distributions are taxable as ordinary income and may also be subject to a 10% federal income tax penalty and may also have state tax implications.
See the offering statement for a listing of Qualified Expenses.
Yes. Beneficiary changes can be made and are income tax free if made to an eligible family member of the current beneficiary.
1 Please see the Offering Statement for a definition of elegible beneficiaries and eligible family members.
Log in to your account, enter your banking instructions, indicate the amount you wish to contribute, and submit the instructions.
Simply make your check payable to SMART529, write your beneficiary number (which can be found on your statement) on your check and send it to:
P.O. Box 55371
Boston, MA 02205
There are three ways to take a distribution:
- Log in, go to Investment Managment, and select Distributions.
- Complete the Distribution Request Form and return it to the address on the form.
- Call the SMART529 Service Center and make the request over the phone. Only qualified distributions may be made over the phone.
Opening an Account
You can open an account in SMART529 Select online on this website by completing the information. You can also request a printed enrollment kit be mailed to you. If you reside in or have taxable income in a state other than West Virginia, you should consider whether your state has a qualified tuition program that offers favorable state income tax or other benefits exclusive to your state’s program that are not available under the SMART529 Select program. Taxpayers and residents of other states who are interested in exploring such tax consequences should consult with a qualified tax professional.
You can contribute as much as you like to your SMART529 Select account until the total account balance of all SMART529 Program accounts for that single beneficiary reaches $550,000, at which point no further contributions can be made.1
1For more information about the aggregate amount that can be invested for any Designated Beneficiary, please see the SMART529 Select College Savings Offering Statement .