529 Plans were created to help parents save money for their children’s future college tuition. There are contribution requirements and guidelines you need to follow when opening a 529 Plan. Saving money is difficult, and 529s allow anyone to contribute. And when the money is withdrawn it is taxed at the child’s income level. The funds must be used for educational purposes or a 10% penalty will be levied.
You are allowed to use any state’s 529 plan, not just the one where you reside. Bankrate.com provides an excellent resource by aggregating all the state plans (the the District of Columbia).
“And when the money is withdrawn it is taxed at the child’s income level. ”
This statement is incorrect. When money is withdrawn from a 529, if it is a Qualified Higher Education Expense, the withdrawal is tax-free. The withdrawal would only be taxed IF it is a non-qualified withdrawal. And then depending on how the money is withdrawn would determine whether it is taxable for the owner or for the beneficiary.