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 2021:
- $15,000 per year per student per contributor ($30,000 per married couple who file jointly)
- OR as much as $75,000 ($150,000 per married couple who file jointly) in the first year of a 5-year period
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No limit for 2021, up to $15,000 per donor can be treated as a gift for gift-tax purposes; 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 and high 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 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 apply. |
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