529 Plans for NRIs: Frequently Asked Questions

As an NRI, choosing whether to invest in a 529 plan comes with a horde of questions: What is the impact on potential scholarships? What happens if they move back to India? What are the tax implications? Read on to answer your most pressing questions about 529 Plans for NRIs.

Can a H1B use a 529 Plan to save for kid’s college?

Parents of H1Bs who are not U.S. citizens may be able to open a 529 college savings plan if they are U.S. taxpayers. Most 529 plans require the account owner to be a U.S. citizen or a resident alien who has a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).

Can a non-resident family member use a 529 plan to save for kid’s college?

Most 529 plans require the account owner to be a U.S. citizen or a resident alien who has a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). However, non-U.S. citizens who live outside the U.S. may still contribute to a child’s 529 plan that is owned by someone else.

What are the tax benefits of 529 plans?

529 plans are investment accounts designed to help individuals save and pay for college. Investments in a 529 plan grow tax-deferred and distributions are tax-free when used to pay for qualified education expenses. This tax-free compounding can provide substantially more growth over time than a taxable account (e.g. a mutual fund). These federal tax benefits are only recognized in the U.S.

Can a 529 Plan beneficiary can be changed any time? What are the tax implications?

A 529 plan beneficiary can be changed to a qualifying family member at any time without tax consequences. The 529 plan account owner can name themselves as the beneficiary and change it to the child as long as they have a Social Security Number or Individual Taxpayer Identification Number. 

Can 529 plan funds be used to pay for college overseas?

529 plans may be used to pay for qualified expenses at any eligible post-secondary institution. Eligible institutions include both U.S. and international colleges and universities that qualify for Title IV federal student aid. Qualified expenses include tuition, fees, books, supplies, computers, internet access, and room + board if the student is enrolled on at least a half-time basis. Transportation costs, including airfare to and from the college, are not a qualified 529 plan expense. Students may also use 529 plans to pay for some study abroad programs.

Use the lookup tool below to determine if a particular higher education institution is recognized as an “eligible” institution for purposes of Section 529. The listing is based on the U.S. Department of Education’s school code lookup.

529 Plans for NRIs: Frequently Asked Questions

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