I will try answering some of your questions below, but also recommend doing some background reading on what a 529 is, the tax treatment of them, etc. http://www.collegesavings.org is a decent place to start.
At risk of telling you something you already know, the big benefit of 529s is that earnings on them are not subject to federal income tax, either while they are in teh 529 account, or upon withdrawal as long as the withdrawal is used to pay for qualified higher education expenses (e.g., tuition, room & board, etc.). Also, 529 funds are typically invested in stocks and bonds and thus have potential for better earnings over time than the interest rate you'll get on a savings account. So actually two differences between savings account and 529 - (1) bigger potential return on 529 (though comes with bigger risk as well; you could lose money on the investment, which shouldn't happen with a savings account); and (2) earnings on 529 investment are not subject to federal income tax. Downside of 529 is that the funds are supposed to be dedicated for higher education expenses - if you withdraw funds for non-higher ed purposes, you pay a penalty and lose the advantageous tax treatment. This is in contrast to a savings account, where you can do what you like with the funds.
1. Even though I live in Maryland I can put $into a savings account from another state?
Yes. Generally you can set up a 529 under any state's plan, regardless of residency.
2. Do I need to do something tax wise for this every year?
Depends on (1) whether you have a 529 plan in your state of residence, (2) whether your state gives you tax benefits for contributing to an in-state 529. If you set up a 529 in your state of residence, and if your state gives you state tax benefits for doing so, you may "have something to do tax-wise." Generally what this means is that some amount of what you put into the 529 in a given year is treated as a deduction, which is sheltered from state income tax.
For example, in Massachusetts where I live, up to $2000 of contributions into a Massachusetts 529 plan are sheltered from state taxes. Since MA state tax is around 5%, the tax benefit of an in-state plan are modest (5% of up to $2000 means max state tax savings of $100 per year). Other posters in this thread have noted that Colorado doesn't have a cap on how much of a contribution can be treated as a deduction from state tax treatment, so the state tax benefit is potentially much greater.
3. If yes, would I need to do state tax for the state I go with each year?
Generally the state tax implication (if any) is only for the state in which you reside. If you do an out-of-state plan, you generally don't have to mess with state taxes in the state that runs the plan (unless you later roll your account to a different state's plan, which can complicate things sometimes).
4. What happens when my kid is ready for college...is it a simple process of withdrawal?
Yes.
5. In Maryland it appears that I begin paying off a desired plan of either 4 year college, 2 +2 of community and university etc.
Not quite sure what your question is here, but the general idea of a 529 is that funds in it are used to pay for higher education expenses at qualified institutions, so yes, you'd start pulling out funds when it's time to pay for college or post-graduate educational expenses.
At risk of telling you something you already know, the big benefit of 529s is that earnings on them are not subject to federal income tax, either while they are in teh 529 account, or upon withdrawal as long as the withdrawal is used to pay for qualified higher education expenses (e.g., tuition, room & board, etc.). Also, 529 funds are typically invested in stocks and bonds and thus have potential for better earnings over time than the interest rate you'll get on a savings account. So actually two differences between savings account and 529 - (1) bigger potential return on 529 (though comes with bigger risk as well; you could lose money on the investment, which shouldn't happen with a savings account); and (2) earnings on 529 investment are not subject to federal income tax. Downside of 529 is that the funds are supposed to be dedicated for higher education expenses - if you withdraw funds for non-higher ed purposes, you pay a penalty and lose the advantageous tax treatment. This is in contrast to a savings account, where you can do what you like with the funds.
1. Even though I live in Maryland I can put $into a savings account from another state?
Yes. Generally you can set up a 529 under any state's plan, regardless of residency.
2. Do I need to do something tax wise for this every year?
Depends on (1) whether you have a 529 plan in your state of residence, (2) whether your state gives you tax benefits for contributing to an in-state 529. If you set up a 529 in your state of residence, and if your state gives you state tax benefits for doing so, you may "have something to do tax-wise." Generally what this means is that some amount of what you put into the 529 in a given year is treated as a deduction, which is sheltered from state income tax.
For example, in Massachusetts where I live, up to $2000 of contributions into a Massachusetts 529 plan are sheltered from state taxes. Since MA state tax is around 5%, the tax benefit of an in-state plan are modest (5% of up to $2000 means max state tax savings of $100 per year). Other posters in this thread have noted that Colorado doesn't have a cap on how much of a contribution can be treated as a deduction from state tax treatment, so the state tax benefit is potentially much greater.
3. If yes, would I need to do state tax for the state I go with each year?
Generally the state tax implication (if any) is only for the state in which you reside. If you do an out-of-state plan, you generally don't have to mess with state taxes in the state that runs the plan (unless you later roll your account to a different state's plan, which can complicate things sometimes).
4. What happens when my kid is ready for college...is it a simple process of withdrawal?
Yes.
5. In Maryland it appears that I begin paying off a desired plan of either 4 year college, 2 +2 of community and university etc.
Not quite sure what your question is here, but the general idea of a 529 is that funds in it are used to pay for higher education expenses at qualified institutions, so yes, you'd start pulling out funds when it's time to pay for college or post-graduate educational expenses.