529 savings plans offer some of the best tax savings in the list of tax-advantaged accounts. Whereas an IRA gives you an instant tax savings and tax-free investment growth until you withdraw the money.
You will still have to pay federal income taxes on your 529 contributions but most people get a state tax deduction. The other tax benefits, tax-free growth and withdrawals, makes 529 accounts the perfect way to save for education.
529 accounts are typically limited to U.S. citizens or legal residents that are at least 18 years of age or with parental consent. A trust, estate or another organization can also set up a 529 account but must have a social security number or tax ID.