Modern finance · 1950s–1990s
1996
529 plans for college
Congress gives state college savings plans a federal tax break.
Michigan started a prepaid tuition plan in 1986, and other states followed. The Small Business Job Protection Act of 1996 added section 529 to the tax code, making these state plans' earnings free of federal tax until withdrawn.
Later laws made withdrawals for qualified education costs fully tax-free (2001) and let limited unused amounts roll into a Roth IRA (from 2024).
💡 Why it made sense then
College costs were rising faster than incomes, and states wanted families to save ahead instead of borrowing.
Ideas it gave us
- 🧭 529 plan
A 529 plan is a US account for education savings. Gains aren't taxed, and withdrawals for qualified education costs, like college tuition, are tax-free.
Practise with $10,000 in play money
Free. No real money involved.