Can You Deduct Losses on a 529 Plan?

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Losses cannot be deducted on a 529 plan because the money invested in a 529 is tax deferred, so there is no option for deducting losses. Find out how the tax deferral status of 529 plans is a huge benefit to the investor with information from an investment portfolio manager in this free video on investing and personal finance.

Part of the Video Series: Investing & Retirement Funds
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Video Transcript

Can you deduct losses in a 529 plan? Well the answer is no and the reason being is that a 529 plan is a tax deferred or qualified plan, very much the same way an IRA or retirement plans is and none of those accounts give you the option of deducting losses. The advantage they give you is that you can build money tax deferred so if you make $10 on your $100 that is in there for example you don't get taxed on that $10. You are able to make more interest on that $110 and so on and so forth so the tax deferral basically gives you a huge leg up as opposed to a nonqualified plan and the 529 being tax deferred or a qualified plan is going to not allow you to take the losses and claim those as losses on your income tax.


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