National College Savings Program

The State Education Assistance Authority enables residents of any state to invest funds to pay the qualified higher education expenses of designated beneficiaries on a flexible basis that achieves certain tax savings in accordance with federal tax law and the North Carolina tax law.

Individuals may participate in the Program regardless of income level and state of residency. Participants may establish accounts representing interests in the Trust Fund and other contributors may make cash contributions to those Accounts. These contributions, along with the earnings, are invested through one or more of the available investment options authorized by the Authority of the Trust Fund.

The expenses that can be paid with funds withdrawn from an Account without the payment of federal income taxes on earnings are called “Qualified Higher Education Expenses” and consist of the expenses allowed under Section 529 of the Internal Revenue Code. Generally, these expenses include tuition, fees and costs of books, supplies and certain equipment; certain room and board costs are also included for students attending Eligible Institutions on at least a half-time basis.

The Program is designed to meet the requirements of a “qualified tuition program” under Section 529 in order to enable Participants and Beneficiaries to qualify for the federal tax benefits applicable to these programs. The federal tax benefits include the following:

  • The Trust Fund is exempt from federal income tax;
  • Contributions to an Account are not includible in computing the federal taxable income of the beneficiary of the Account;
  • No earnings in an Account are includible in computing the federal taxable income of either the participant or the beneficiary as long as the earnings remain in the Trust Fund; and
  • The earnings portion of any amount withdrawn from an Account and used to pay Qualified Higher Education Expenses of the beneficiary is not includible in computing the federal taxable income of either the participant or the beneficiary.

Under current North Carolina law, amounts representing earnings that are distributed from the Trust Fund for payment of Qualified Higher Education Expenses are generally not subject to North Carolina income tax.

To contact an account representative of the College Foundation of North Carolina, call toll free 1.800.600.3453 or visit CFNC.org/Savings
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