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Comparison - 529 College Savings Plan, Coverdell ESA, Custodial Accounts

Ready to select an account to save for education? Compare them below, or call one of our experienced investment professionals at 1-866-243-0931 for more assistance.


Coverdell Education Savings Account (ESA)

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529 Plan from Wells Fargo Advisors

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Custodial Account from Wells Fargo Advisors

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Account Description
Tax-deferred account with earnings and withdrawals free from federal income tax if used for qualified education expenses prior to age 30; contribution limits apply

A flexible tax-advantaged way to invest for education. 529 plans allow you to:

  • Invest for a loved one’s education or even for yourself
  • Make sizable contributions each year
  • Shift portions of an estate to future generations

A simple way to transfer property to a minor; called a Uniform Transfer to Minors (UTMA) or Uniform Gift to Minors (UGMA) depending in which state the minor resides
Income Eligibility Restrictions
  • Single contributor with modified adjusted gross income less than $95,000 (annual contribution reduced if contributor’s income is between $95,000 and $110,000)
  • Joint/married contributors with modified adjusted gross income less than $190,000 (annual contribution is reduced if contributors' income is between $190,000 and $220,000)

None
None
Beneficiary age limits
Age 18, must be used by beneficiary by age 30
No age limit
Generally up to age of termination (18 - 21) for your state
Maximum yearly contribution per student
  • $2,000 a year per student until age 18; exception for children with special needs
To avoid exceeding annual federal gift tax exclusion for 2022:
  • $16,000 per year per student per contributor ($32,000 per married couple who file jointly)
  • OR as much as $80,000 ($160,000 per married couple who file jointly) in the first year of a 5-year period

No limit for 2022, up to $16,000 per donor can be applied toward the annual gift-tax exclusion; additional gifts are subject to gift tax rules
Qualified withdrawals
  • Qualified education expenses including tuition, room and board, fees, books, equipment, and supplies at an eligible elementary, secondary, and post-secondary school, as well as computer equipment for elementary, secondary, and post-secondary school (restrictions apply) 
  • Academic tutoring, uniforms, transportation, and supplementary items and services (including extended day programs may also be qualified if incurred or required by an eligible elementary or secondary school
  • Qualified higher education expenses include tuition, fees, books, computer equipment and technology, and supplies required for enrollment or attendance at the eligible post-secondary institution. Room and board are qualified expenses for students who are at least half time.
  • Qualified expenses also include expenses for registered apprenticeship programs and up to $10,000 lifetime for qualified student loan repayment.   
  • Up to $10,000 annually per beneficiary for tuition at elementary or secondary schools.  
  • State laws may vary; consult your tax advisor.
Must be used for benefit of the minor. Subject to state law.
Penalties for non-qualified withdrawals
  • Earnings subject to ordinary income tax 
  • 10% IRS penalty on earnings; limited exceptions may apply

  • Earnings subject to ordinary income tax
  • 10% IRS penalty on earnings; limited exceptions may apply


N/A


Taxation of earnings and withdrawals
  • Contributions to the account have the potential to grow tax-advantaged for future education expenses
  • Earnings are generally free from federal income tax if used for qualified expenses before the student turns age 30 (exception for children with special needs )
  • Withdrawals may be free from federal income tax if used for qualified expenses 
  • Earnings portion of distributions may be taxable in years the American Opportunity Credit or Lifetime Learning Credit is used if same expenses used to qualify for credit
  • Contributions to the account have the potential to grow tax-advantaged for future education expenses
  • Withdrawals may be free from federal income tax if used for qualified expenses 
  • Earnings portion of distributions may be taxable in years the American Opportunity Credit or Lifetime Learning Credit is used if same expenses used to qualify for credit
  • State tax deductions and/or credits vary
  • Contributions may qualify for a state-income-tax deduction
  • The availability of such tax or other benefits may be conditioned on meeting certain requirements
Earnings are taxable to the minor. ”Kiddie tax” rules may apply.
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Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.