ATLANTA - The state rolled out a new college savings plan Wednesday that uses tax incentives to entice families to save. <br>
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The 529 plan allows unlimited contributions -- from parents or any other benefactor -- until the account reaches $235,000. Earnings on the investments are not taxed so long as the money is used for college. <br>
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Contributors to the plan get a Georgia tax deduction of up to $2,000 a year. The money can be earmarked for any student attending any college, in Georgia or any other state. <br>
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States began introducing 529 plans in 1996, and Georgia is one of the last states to adopt it. Each state has its own rules for setting up and adding to the accounts. <br>
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Stacey and Jon Shoats, a metro Atlanta couple, said they plan to set up a 529 account for their seven-year-old daughter and any siblings that follow. They said they want to spare their children the burden of debt that they carried after college. <br>
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Money in a 529 account can be withdrawn tax-free for undergraduate, graduate, medical and law school. Expenses for trade, technical and vocational schools also qualify. <br>
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The federal Internal Revenue Service, which set guidelines for the state plans, imposes a ten percent penalty if the money is withdrawn for non-college reasons -- and taxes the earnings.
