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

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
  
  

• Single filer with modified adjusted gross income (MAGI) less than $95,000 (annual contribution reduced if MAGI is between $95,000 and $110,000)
• Joint filers with MAGI less than $190,000 (annual contribution is reduced if MAGI is between $190,000 and $220,000)
  
  

• The account must be emptied within 30 days after the beneficiary reaches age 30, or death if they die before age 30.
• No age limit for a special needs beneficiary.

• $2,000 a year per student until age 18.
• Contributions may be made until  the beneficiary, reaches age 18.
• Special needs beneficiaries are allowed contributions beyond 18.
  

• $17,000 per year per student per contributor ($34,000 per married couple who file jointly)
• OR as much as $85,000 ($170,000 per married couple who file jointly) in the first year of a 5-year period
  
  

• Qualified education expenses including tuition, fees, books, equipment, and supplies at an eligible elementary, secondary, and post-secondary school, as well as room and board, and 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.

• 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

• Contributions to the account have the potential to grow and be distributed tax-free if used for qualified education expenses
  
• Earnings are generally 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