What's A 529?
A 529 is a tax-advantaged education savings plan designed to help students reach their full potential.
A 529 plan is a tax-advantaged college savings plan designed to make post-secondary education more affordable for families. The Education Plan® is the name of New Mexico’s 529 college savings plan.
Why are 529 plans important for families?
Don’t be deterred by sticker shock. Financing a college education is a matter of combining several resources to accomplish the task. Not many families can afford the full cost of college. Paying for post-secondary education – college, vocational school, professional school or a graduate degree – usually involves a mix of:
- Scholarships & Grants - Gift aid awarded based on a variety of factors, such as: demonstrated financial need, academic achievement, leadership and field of study
- Need-Based Financial Aid - EFC (estimated family contribution) is subtracted from COA (cost of attendance) to determine amount of financial aid needed, need-based financial aid is determined based on the remaining amount
- Work Study - Government funds allowing for part-time employment of eligible students
- Personal Savings
- 529 Plan: a tax advantaged plan that is used specifically to save for college expenses
- Classic Savings Account: a traditional option that will earn a small amount of interest over time
- Student Loans - These are private or federal and require repayment with varying interest rates
A 529 Plan is one element that can help to greatly reduce the future burden of student loan debt. Starting a 529 Plan early and saving as often as possible can reduce future out-of-pocket costs.
Why is it called a “529” Plan?
529 college savings plans are named for Section 529 of the federal tax code. Congress created them as a way for families to save for their children’s future education. These plans let your earnings grow without federal tax, and the money you withdraw is also federal tax-free, as long as it’s used to pay for qualified education expenses.
If you’re a New Mexico taxpayer, your contributions to the plan can also be deducted from your state income taxes for post-secondary education.
Who can invest in a 529 Plan?
The Education Plan is offered to any U.S. resident no matter where they live in the U.S. Any U.S. citizen or resident with a valid Social Security number or a Taxpayer Identification Number (TIN) can open a 529 savings account. Most 529 account savers will be parents, but family and friends can open an account for a child or contribute to an account opened by someone else. You can even open one for yourself or your spouse!
Whether you’re new to investing or you’re an experienced investor, The Education Plan offers a variety of investment choices to meet your needs and risk tolerance.
Is a 529 Plan any better than a savings account?
529 plans are different than regular savings accounts and offer several potential advantages. First, while savings accounts are low risk, they currently credit a low rate of interest. 529 plans invest in mutual funds which have potentially higher risk but also the potential for higher investment returns. 529 plans also have tax advantages that regular savings accounts don't provide. Mutual fund investments are not guaranteed and can lose money.
What expenses do 529 plans cover?
529 plans are flexible. Your account can be used to pay for a wide range of qualified educational expenses:
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Tuition and fees
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Books
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Supplies and equipment
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Room and board for beneficiaries attending on at least a half-time basis.
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Computer technology, equipment, internet access
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Expenses for educational special needs services
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Up to $20,000 a year for K-12 tuition and expenses
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Transfers up to $19,000 a year to an ABLE account for the beneficiary
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Apprenticeship expenses
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Up to $10,000 for student loan repayment
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Roth IRA Rollovers
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Credentialing Expenses
1 The Plan is neither FDIC insured nor guaranteed and may lose value.
2 When withdrawals are used for other purposes, the earnings portion of the withdrawal is subject to federal income taxes and any applicable state income tax, as well as an additional 10% federal tax and the recapture of all previous New Mexico tax deductions taken for contributions to an account.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
