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 2023 RULES	Coverdell Education Savings Accounts	Roth IRA	Traditional IRA
Federal Income Tax	Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excluded	Non-deductible contributions; withdrawn earnings excluded from income after age 59 1/2 – and five years; 10% penalty on early withdrawals waived if used for qualified higher education expenses	Deductible or non-deductible contributions; withdrawals in excess of basis subject to tax; 10% penalty on early withdrawals waived if used for qualified higher education expenses
Federal Gift Tax Treatment	Contributions treated as completed gifts; apply $16,000 annual exclusion	No gift involved	No gift involved
Federal Estate Tax Treatment	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	$2,000 per beneficiary per year combined from all sources	$6,000 ($7,000 for taxpayers age 50 and over)	$6,000 ($7,000 for taxpayers age 50 and over)
Qualified Expenses	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.	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.
Able to Change Beneficiary	Yes, to another member of the beneficiary's family	Not applicable	Not applicable
Time/Age Restrictions	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	Withdraw without penalty only after age 59 1/2
Income Restrictions	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 $204,000 and $214,000 (joint filers) or $129,000 and $144,000 (single)	Must have taxable compensation; amount deductible reduced or eliminated for taxpayers who participate in an employer retirement plan and have income above certain limits
Federal Financial Aid	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	Not counted as asset; withdrawals of principal and interest counted as financial aid income
Investments	Broad range of securities and certain other investments	Broad range of securities and certain other investments	Broad range of securities and certain other investments
Use for Nonqualifying Expenses	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	Taxable portion of withdrawal prior to age 59 1/2 also subject to 10% early withdrawal penalty

Top 529 College Savings Plans

One-year rankings are based on a plan's average investment returns over the last 12 months.

	State	Plan Name
1	Alaska	Alaska 529
1	Alaska	T. Rowe Price College Savings Plan
3	Montana	Achieve Montana

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