An education investment account created for a specific beneficiary which may have federal and state income tax benefits. A 529 plan is typically created for a child or other close relative to help cover the costs of their secondary education. Some states offer a credit or deduction for state income tax purposes for contributions to a 529 plan. A 529 plan grows free of federal income tax and distributions for qualified education expenses are not subject to federal income tax. Qualified education expenses include tuition, fees, books, and room and board at an eligible educational institution. A 529 plan can be structured either as a prepayment of tuition for a specific school or as a general account that can make distributions for any school. Up to $10,000 from a 529 plan may be used for tuition at an elementary or secondary school. Any distribution that is not for a qualified education expense will be subject to federal income tax and may also be subject to an additional 10% tax.