Uncategorized We Started a College Fund with “Free Money” from the IRS Read the Article Open Share Drawer Share this: Share on Facebook (Opens in new window) Facebook Share on X (Opens in new window) X Share on LinkedIn (Opens in new window) LinkedIn Share on Pinterest (Opens in new window) Pinterest Print (Opens in new window) Print Written by Kelly Kearsley Published Feb 18, 2026 3 min read Reviewed by Lena Hanna, CPA Key takeaways A tax refund can accelerate your child’s college savings Using a refund to fund a 529 account offers tax benefits The IRS allows you to direct deposit your refund into a 529 account Table of Contents Key takeawaysA smarter way to save for college529 FAQ 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. Your refund is waiting Get started This year, I’m using my tax refund to make real progress. Contributions to a 529 plan means that money can grow tax-free and 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 Offer potential state tax deductions or credits If you’re considering using your refund this way, a few common questions tend to come up. 529 FAQ What type of college savings accounts should I use? The most common type of college savings account 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 use IRS Form 8888 to direct deposit all or part of your refund into a college savings account for your child when you file your taxes. 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), you may need to file a gift tax return. Do 529 contributions offer tax benefits? Yes. Contributions grow tax-free, and withdrawals for qualified education expenses are also tax free. Some states offer additional tax deductions or credits. 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. How can my tax refund help us save more for college? 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. 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. Previous Post My Boss Said Tips and OT are Tax-Free Now. I… Your refund is waiting Get started Written by Kelly Kearsley Kelly Kearsley is a journalist who creates financial services content. Her work has appeared in Money, The Wall Street Journal, and CNNMoney and she brings a strong reporting background to explaining complex topics with clarity and accuracy. Her debut novel, Talented and Gifted, will be published by Hachette/Grand Central Publishing in 2027. More from Kelly Kearsley Browse Related Articles Education How to Start a College Fund for Your Kids Deductions and Credits Get Educated on College Savings Tax Breaks Tax Planning Back to School Series: It’s Time to Use Your 529 Savings. Now What? 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