Your investment in a qualified 529 Plan grows federal income tax deferred - that is, earnings are not taxed until they are withdrawn.
Many states also allow the earnings to grow state tax deferred.
When withdrawn from the account for qualified higher education expenses, the earnings are taxed at the beneficiary's federal tax rate, which is typically lower than the account owner's rate. Other college savings vehicles, such as an Education IRA, restrict individuals from investing if their income is more than a certain amount. This menu of investment options allows you to choose the portfolio that is most appropriate for your beneficiary's situation and your preferred investment approach. Qualified expenses include tuition, fees, room and board, books and other supplies needed for attendance of a student at an institution of higher education.