Account Description
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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
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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
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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
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Income Eligibility Restrictions
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- 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)
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None
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None
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Beneficiary age limits
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Age 18, must be used by beneficiary by age 30
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No age limit
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Generally up to age of termination (18 - 21) for your state
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Maximum yearly contribution per student
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- $2,000 a year per student until age 18; exception for children with special needs
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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
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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
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Qualified withdrawals
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- 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
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- 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.
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Must be used for benefit of the minor. Subject to state law.
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Penalties for non-qualified withdrawals
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- Earnings subject to ordinary income tax
- 10% IRS penalty on earnings; limited exceptions may apply
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- Earnings subject to ordinary income tax
- 10% IRS penalty on earnings; limited exceptions may apply
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N/A
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| 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
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- 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
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Earnings are taxable to the minor. ”Kiddie tax” rules may apply. |
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