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 2025 RULES | 529 Plan | UGMA/UTMA | Mutual Funds |
---|---|---|---|
Federal Income Tax | Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses | Earnings and gains taxed to minor; first $1,100 of unearned income is tax exempt; unearned income over $2,200 for certain children under age 24 is taxed at rates for estates and trusts | 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 | Transfers treated as completed gift; apply $18,000 annual gift exclusion | 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 unless donor remains as custodian | Value included in the owner's gross estate | Maximum Investment | Established by the program; many in excess of $400,000 per beneficiary | No limit | 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. | No restrictions | No restrictions | Able to Change Beneficiary | Yes, to another member of the beneficiary's family | No; represents an irrevocable gift to the child | Not applicable | Time/Age Restrictions | None unless imposed by the program | Custodianship terminates when minor reaches age established under state law (generally 18 or 21) | None | Income Restrictions | None | None | None | Federal Financial Aid | Counted as asset of parent if owner is parent or dependent student | Counted as student's asset | Counted as asset of the owner | Investments | Menu of investment strategies as developed by the program | As permitted under state laws | Mutual funds | Use for Nonqualifying Expenses | Withdrawn earnings subject to federal tax and 10% penalty | Funds must be used for benefit of the minor | No restrictions |