How to Open a 529 Plan in Colorado

A 529 plan is a savings vehicle designed to accumulate funds for future education expenses. Authorized under Section 529 of the Internal Revenue Code, these plans offer federal tax advantages. Contributions are made with after-tax dollars and are not federally tax-deductible. Earnings grow tax-deferred, and qualified withdrawals are free from federal income tax. This tax-advantaged growth and withdrawal makes 529 plans a popular choice for financing educational pursuits.

Colorado’s 529 Plan Options

Colorado offers 529 college savings plans through CollegeInvest, the state’s not-for-profit agency. Several distinct plans are available, designed to cater to different investment preferences and needs. Savers can choose a plan that aligns with their financial goals and risk tolerance.

The CollegeInvest Direct Portfolio Plan is a direct-sold plan featuring Vanguard investments. It offers various investment options, from conservative to aggressive, allowing account owners to choose portfolios matching their risk profiles. The CollegeInvest Scholars Choice Plan is for those who prefer to work with a financial professional. This advisor-sold plan offers professionally managed investments, including age-based options that automatically adjust asset allocation as the beneficiary approaches college age.

For principal protection, the CollegeInvest Stable Value Plus Plan guarantees an annual rate of return. Underwritten by Nationwide, this plan focuses on preserving capital while offering a declared annual interest rate. CollegeInvest also offers the Smart Choice Plan, which provides FDIC-insured savings options. These plans allow Colorado residents to benefit from state tax advantages.

Preparing to Open Your Account

Before opening a Colorado 529 account, gather specific personal and financial information.

Account owners need to provide their full name, address, date of birth, and Social Security Number (SSN) or Taxpayer Identification Number (TIN).
Beneficiary details, including full name, SSN, date of birth, and relationship to the account owner, are also required.
Any individual can be an account owner or beneficiary.

Selecting an investment strategy is another step before opening the account. CollegeInvest plans offer various investment choices:

Age-based portfolios automatically adjust asset allocation from more aggressive to conservative as the beneficiary nears college enrollment.
Static portfolios maintain consistent asset allocation regardless of age.
Individual fund options allow for customized investment selections.

Consider the beneficiary’s age, anticipated timeline for using funds, and the account owner’s risk tolerance when making investment decisions. Decisions regarding contribution amounts and frequency are also part of preparation. Most CollegeInvest plans have a low minimum initial contribution, often $25, with subsequent contributions as low as $15. Account owners can plan for one-time contributions, recurring automatic deposits, or payroll deductions.

Contributions to any CollegeInvest 529 account are deductible from Colorado state income tax. For the 2025 tax year, deduction limits are $25,400 per taxpayer per beneficiary for single filers and $38,100 per tax filing per beneficiary for joint filers. This deduction is available for contributions by individuals, estates, and trusts.

Opening Your Colorado 529 Account

Once information and decisions are prepared, opening a Colorado 529 account can begin. The primary method for opening an account is through an online application. Some plans may offer the option to apply by mail, which involves downloading and completing paper forms.

To open an account online, navigate to the CollegeInvest website and select your preferred 529 plan. The application prompts for account owner and beneficiary information, including names, addresses, dates of birth, and Social Security Numbers. Next, select chosen investment options, such as age-based or static portfolios. The final step involves setting up the initial contribution, which can be done via electronic bank transfer or by indicating a check payment.

For mail-in applications, obtain forms from the CollegeInvest website or by contacting customer service. These forms require the same information as the online application. Once completed, mail the forms and any initial contribution by check to the address provided by CollegeInvest. After submission, account owners receive a confirmation email or mail with their new account number and details.

Managing Your Colorado 529 Plan

After a Colorado 529 plan is established, ongoing management maximizes its benefits. Account owners can make additional contributions through recurring automatic investments from a bank account or one-time contributions by check or electronic transfer. Some employers may offer payroll direct deposits.

Monitoring account performance is straightforward, as CollegeInvest provides online statements and performance reports. Account owners can regularly review investment growth and current balances to remain on track toward savings goals. Flexibility allows account owners to update investment options, typically once per calendar year or upon a change in beneficiary. Beneficiary information or account owner details can also be updated as life circumstances evolve.

When using funds, understanding qualified withdrawals is essential for maintaining the tax-free status of earnings. Qualified education expenses include:

Tuition, fees, books, supplies, and equipment required for enrollment or attendance at eligible educational institutions, which encompass colleges, universities, vocational schools.
K-12 public, private, or religious schools (up to $10,000 annually for K-12 tuition).

Room and board expenses also qualify if the student is enrolled at least half-time. Requesting withdrawals involves submitting a request to CollegeInvest, specifying the amount and recipient (account owner, beneficiary, or educational institution).

Colorado taxpayers should claim their state income tax deduction for CollegeInvest contributions annually when filing state tax returns. This deduction applies to contributions made throughout the tax year and must be reported on the Colorado income tax form, often requiring the account owner’s SSN or TIN. Non-qualified withdrawals, not used for qualified education expenses, have tax implications. The earnings portion becomes subject to federal income tax and a 10% federal penalty tax. Any Colorado state income tax deductions previously claimed may be subject to recapture by the state.