COLLEGE SAVINGS 101
Compare savings options
Summarizes and compares the features of 529 plans, 529 ABLE plans, ESAs, UTMAs, IRAs, and education savings bonds.
| YEAR 2024 RULES | 529 Plan | Coverdell Education Savings Accounts | Roth IRA | Mutual Funds |
|---|---|---|---|---|
| Federal Income Tax | Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses | Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excluded | Non-deductible contributions; withdrawn earnings excluded from income after age 59 1/2 – and five years; 10% penalty on early withdrawals waived if used for qualified higher education expenses | Earnings and gains taxed in year realized; special lower tax rates for certain dividends and capital gains | Federal Gift Tax Treatment | Contributions treated as completed gifts; apply $18,000 annual exclusion, or up to $90,000 with 5-year election | Contributions treated as completed gifts; apply $18,000 annual exclusion | No gift involved | No gift involved; direct payments of tuition not considered gifts | Federal Estate Tax Treatment | Value removed from donor's gross estate; partial inclusion for death during a 5-year election period | Value removed from donor's gross estate | Value included in the owner's gross estate | Value included in the owner's gross estate | Maximum Investment | Established by the program; many in excess of $400,000 per beneficiary | $2,000 per beneficiary per year combined from all sources | $7,000 ($8,000 for taxpayers age 50 and over) | No limit | Qualified Expenses | College 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. Up to $35,000 can be transferred to beneficiary's Roth IRA in certain circumstances. | Tuition, fees, books, supplies, equipment, special needs; room & board for min. half- time students; additional types of K-12 expenses | College 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. | No restrictions | Able to Change Beneficiary | Yes, to another member of the beneficiary's family | Yes, to another member of the beneficiary's family | Not applicable | Not applicable | Time/Age Restrictions | None unless imposed by the program | Contributions before beneficiary reaches age 18; use of account by age 30 | Withdraw earnings tax-free only after five years and age 59 1/2 | None | Income Restrictions | None | Contributions phase out for incomes between $190,000 and $220,000 (joint filers) or $95,000 and $110,000 (single filers). No annual inflation adjustment | Must have taxable compensation; contribution limit phases out for incomes between $230,000 and $240,000 (joint filers) or $146,000 and $161,000 (single) | None | Federal Financial Aid | Counted as asset of parent if owner is parent or dependent student | Counted as asset of parent if owner is parent or dependent student | Not counted as asset; withdrawals of principal and interest counted as financial aid income | Counted as asset of the owner | Investments | Menu of investment strategies as developed by the program | Broad range of securities and certain other investments | Broad range of securities and certain other investments | Mutual funds | Use for Nonqualifying Expenses | Withdrawn earnings subject to federal tax and 10% penalty | Withdrawn earnings subject to federal tax and 10% penalty | Taxable portion of withdrawal prior to age 59 1/2 also subject to 10% early withdrawal penalty | No restrictions |
