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 | Roth IRA | UGMA/UTMA |
|---|---|---|
| Federal Income Tax | Non-deductible contributions; withdrawn earnings excluded from income after age 59 1/2 – and five years; 10% penalty on early withdrawals waived if used for qualified higher education expenses |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 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 | Federal Gift Tax Treatment | No gift involved | Transfers treated as completed gift; apply $19,000 annual gift exclusion | Federal Estate Tax Treatment | Value included in the owner's gross estate | Value removed from donor's gross estate unless donor remains as custodian | Maximum Investment | $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. | No restrictions | Able to Change Beneficiary | Not applicable | No; represents an irrevocable gift to the child | Time/Age Restrictions | Withdraw earnings tax-free only after five years and age 59 1/2 | Custodianship terminates when minor reaches age established under state law (generally 18 or 21) | Income Restrictions | Must have taxable compensation; contribution limit phases out for incomes between $236,000 and $246,000 (joint filers) or $150,000 and $165,000 (single) | None | Federal Financial Aid | Not counted as asset; withdrawals of principal and interest counted as financial aid income | Counted as student's asset | Investments | Broad range of securities and certain other investments | As permitted under state laws | Use for Nonqualifying Expenses | Taxable portion of withdrawal prior to age 59 1/2 also subject to 10% early withdrawal penalty | Funds must be used for benefit of the minor |
