Today's parents have several options for college savings,
including Section 529 Plans, Coverdell Education Savings
Accounts and custodial accounts such as Uniform Gifts
to Minors Accounts and Uniform Transfers to Minors Accounts.
| |
529 Plans |
Coverdell ESAs |
UGMA/UTMA Accounts |
| What can the funds be used for? |
Higher education expenses including tuition, room
and board and books |
Education expenses from kindergarten through graduate
school |
Any use that benefits the child |
| Who maintains control of the funds? |
Owner maintains control of the funds, can decide
on withdrawals and may change the beneficiary |
Beneficiary may assume control at age of majority |
Beneficiary assumes control at age of majority |
| Is participation limited by income levels? |
No limits |
Phased out for married couples with incomes between
$190,000 and $220,000; and for individuals with
incomes between $95,000 and $110,000 |
No limits |
| How much can be contributed? |
$250,000 per beneficiary |
$2,000 per year per beneficiary |
None |
| How is the plan treated for Federal income tax
purposes? |
Earnings grow Federal tax free, and withdrawals
for qualified higher education expenses are Federal
tax-free |
Earnings can grow free from tax, and withdrawals
for qualified elementary, secondary and higher education
expenses are free from Federal tax |
For children under 14, the first $800 of earnings
is tax-free. Earnings between $800 and $1,600 are
taxed at the child rate; earnings over $1,600 are
taxed at the parents' rate. All earnings for children
over 14 are charged at the child's tax rate. |
| What is the penalty for non-qualified withdrawals?
|
Ordinary income tax plus 10% Federal tax penalty
on earnings |
Ordinary income tax plus 10% Federal tax penalty
on earnings |
None |
| Can the beneficiary be changed once the plan is
established? |
Yes |
Yes |
None |
