We Started a College Fund with Our IRS Tax Refund

Your tax refund doesn’t have to disappear into everyday expenses; it can actually become a head start on one of the biggest investments you’ll ever make for your child. Putting that refund into a 529 plan means it grows tax-free over time, and you can use it for tuition, books, and supplies from kindergarten through college.

As the mom of two teens, just thinking about the cost of their college education can instantly raise my pulse. But I know building their savings will take more than skipping takeout.

This year, I’m using my tax refund to make real progress. Contributions to a 529 plan means that money can grow tax-free, so our family can stay focused on their future.

A smarter way to save for college

When you’re thinking about college costs, every dollar matters. A 529 plan helps your refund do more than sit in a savings account. It can:

• Grow tax-free through a range of investment options
• Provide tax-free withdrawals for qualified education expenses
• Cover tuition, fees, books, supplies, and even up to $20,000 per year in K-12 tuition starting in tax year 2026
• Offer potential state tax deductions or credits

The earlier you begin saving for college, the more you’ll benefit from market-related growth within the account. Contributing your refund offers an opportunity to invest your cash and designate those savings for your child’s future.

If you’re considering using your refund this way, a few common questions tend to come up.

What type of college saving accounts should I choose?

The most common option is a 529 college savings plan. These plans are offered by states and provide tax-free growth and withdrawals on funds used for qualified education purposes.

Can I use my tax refund to fund a college savings account?

Yes. You can useIRS Form 8888 to direct deposit all or part of your refund into a college savings account for your child when you file your taxes. Here’s more information from the IRS on how to use the form to direct deposit your refund into one, two, or three accounts.

Once your money is in a 529, the benefits start adding up:

• Tax-free growth on contributions
• Tax-free withdrawals for qualified education expenses
• Possible state tax deductions or credits
• Flexible investment options based on your timeline and risk tolerance
• The ability to roll over up to $35,000 of unused funds into a Roth IRA for the beneficiary (subject to IRS rules)

Are there contribution limits for 529 plans?

The IRS doesn’t set an annual contribution limit, but states set lifetime maximums. If contributions exceed the federal annual gift tax inclusion ($19,000 per individual or $38,000 for couples filing jointly for the 2026 tax year), you may need to file a gift tax return.

What happens if I don’t use all the money saved in the plan for college?

Withdrawals not used for qualified educational purposes (or rolled over into a Roth IRA under current IRS rules) are subject to income taxes and a 10% penalty. Some states may also impose additional penalties.

Who can set up a 529 plan?

Anyone can set up a 529 plan, and you can name anyone as the beneficiary, including your children, your spouse, or yourself.

Want your refund to work harder? Start your return with TurboTax and put your refund to work investing in the future.

How do I deposit my refund into a 529 plan?

When filing your return, choose direct deposit and complete IRS Form 8888 to allocate your refund to the 529 account. You can split your refund across multiple accounts, if needed.

Want your refund to work harder? Start your return with TurboTax and put your refund to work investing in the future.