The 529 Savings Plan can be used as prepaid tuition or a college savings plan. A 529 is an after-tax plan where someone makes contributions to a plan where the monies deposited can be used for tuition(college and in many states private schools). Withdrawals from a 529 account are tax-free as long as they meet specific requirements. The new federal tax law allows 529 accounts to be used to pay for private schools as well as colleges. But, over 15 states have still not adopted the Federal law. The Tax Cuts and Jobs Act of 2017 changed the 529 law which allows private schools to be paid for with 529 funds up to $10K per year.
The 529 plan was first introduced in Michigan in 1986 as a Michigan Education Trust (MET) and over time has evolved into the plan it is today. Monies in 529 accounts can increase in value over time and the increase in value is tax free. If, however, the monies in a 529 account are withdrawn and not used following state and federal laws the withdrawn amount will be taxed as income tax and will also incur a 10% tax penalty.