COLLEGE SAVINGS 101

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Summarizes and compares the features of 529 plans, 529 ABLE plans, ESAs, UTMAs, IRAs, and education savings bonds.

YEAR 2022 RULES529 PlanCoverdell Education Savings AccountsQualifying U.S. Savings Bonds
Federal Income TaxNon-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expensesNon-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excludedTax-deferred for federal; tax-free for state; certain post-1989 Series EE and I bonds may be redeemed federal tax-free for qualified higher education expenses
Federal Gift Tax TreatmentContributions treated as completed gifts; apply $16,000 annual exclusion, or up to $80,000 with 5-year electionContributions treated as completed gifts; apply $16,000 annual exclusionNo gift as qualifying bonds must be owned by the parent
Federal Estate Tax TreatmentValue removed from donor's gross estate; partial inclusion for death during a 5-year election periodValue removed from donor's gross estateValue included in bond owner's gross estate
Maximum InvestmentEstablished by the program; many in excess of $400,000 per beneficiary$2,000 per beneficiary per year combined from all sources$10,000 face value per year, per owner, per type of bond
Qualified ExpensesCollege tuition, fees, books, computers and related equipment, supplies, special needs; room and board for minimum half-time students. Up to $10,000 in tuition expenses for K-12 schools. Up to $10,000 in student loan repayment.Tuition, fees, books, supplies, equipment, special needs; room & board for min. half- time students; additional types of K-12 expensesTuition and fees
Able to Change BeneficiaryYes, to another member of the beneficiary's familyYes, to another member of the beneficiary's familyNot applicable
Time/Age RestrictionsNone unless imposed by the programContributions before beneficiary reaches age 18; use of account by age 30Bond purchaser must be at least 24 years old at time of bond issuance
Income RestrictionsNoneContributions phase out for incomes between $190,000 and $220,000 (joint filers) or $95,000 and $110,000 (single filers). No annual inflation adjustmentInterest exclusion phases out for incomes between $128,650 and $158,650 (joint filers) or $85,800 and $100,800 (single filers)
Federal Financial AidCounted as asset of parent if owner is parent or dependent studentCounted as asset of parent if owner is parent or dependent studentCounted as asset of bond owner
InvestmentsMenu of investment strategies as developed by the programBroad range of securities and certain other investmentsInterest-earning bond backed by full faith and credit of U.S. government
Use for Nonqualifying ExpensesWithdrawn earnings subject to federal tax and 10% penaltyWithdrawn earnings subject to federal tax and 10% penaltyNo penalty; interest on redeemed bonds included in federal income
 

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