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 2024 RULES529 PlanCoverdell Education Savings Accounts
Federal Income TaxNon-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expensesNon-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excluded
Federal Gift Tax TreatmentContributions treated as completed gifts; apply $18,000 annual exclusion, or up to $90,000 with 5-year electionContributions treated as completed gifts; apply $18,000 annual exclusion
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 estate
Maximum InvestmentEstablished by the program; many in excess of $400,000 per beneficiary$2,000 per beneficiary per year combined from all sources
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. 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
Able to Change BeneficiaryYes, to another member of the beneficiary's familyYes, to another member of the beneficiary's family
Time/Age RestrictionsNone unless imposed by the programContributions before beneficiary reaches age 18; use of account by age 30
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 adjustment
Federal Financial AidCounted as asset of parent if owner is parent or dependent studentCounted as asset of parent if owner is parent or dependent student
InvestmentsMenu of investment strategies as developed by the programBroad range of securities and certain other investments
Use for Nonqualifying ExpensesWithdrawn earnings subject to federal tax and 10% penaltyWithdrawn earnings subject to federal tax and 10% penalty
 

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