Education Savings Comparison Chart
| 529 Plans | Coverdell Education Savings Account |
UTMA Custodial Account | |
|---|---|---|---|
| Income Limits | No limits - anyone can contribute |
Ability to contribute is phased out for joint filers with an income between $190,000 and $220,000 and for individual filers with an income between $95,000 and $110,000 |
No limits |
| Contribution Limits | Maximum contribution varies by state plan Varies between $235,000 -$320,000 Donor may make a gift annually up to $12,000 per child (single filers) or $24,000 per child (joint filers) tax-free2 Donor may initially contribute up to five years worth of contributions, allowing gift-tax free initial deposits of $60,000 per beneficiary ($12,000 gift tax-free maximum per year; five years per donor)3 |
$2,000 per year per beneficiary (must meet income limits)1 |
No limits
You may make an annual gift up to $12,000 per child (single filers) or $24,000 per child (joint filers) tax-free2 |
| Uses | Qualified education expenses such as tuition, books, room and board and supplies for college and graduate school | Qualified education expenses including Tuition, books, room and board for kindergarten through high school, college and graduate school 1 | Any use that benefits the child |
| Oversight | Owner maintains control of assets, decides when withdrawals will be made and can change beneficiaries | Beneficiary may assume control at age of majority (18 or 21 in most states) | Beneficiary may assume control at age of majority (18 or 21 in most states) |
| Ability to change beneficiaries | Yes |
Yes |
No |
| Tax Considerations |
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Disclosures:
- Effective through 2010 unless extended by Congress
- Higher contributions will be subject to federal gift tax regulations.
- In the event the donor does not survive the five-year period, a pro-rated amount will revert to the donor's taxable estate.
- Earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
- Some states have also elected to offer incentives for investing in any state's 529 Plan. Varies per state.
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