529 Saving Plan |
Coverdell ESA |
UGMA/UTMA |
Series I Bonds |
|
Tax Benefits |
Earnings: Federal: Tax-free growth State: Either tax-free or tax-deferred. Varies by state. Withdrawal: Federal: Tax-free State: Either tax-free or taxed by beneficiary's rate. |
Earnings: Federal: Tax-free growth State: Tax-free growth Withdrawal: Federal: Tax-free withdrawal State: Tax-free withdrawal |
Beneficiary Under Age 14: First $750 of earnings free from federal income taxes, next $750 taxed at child's rate. Earnings above $1,500 to parents Beneficiary Over Age 14: Same as above Earnings above $750 taxed at child's rate. |
Earnings: Federal: Tax-deferred growth State: Tax-free Local: Tax-free |
Is the valueof the account excluded from the owner's taxable estate? |
Yes | Yes | No | No |
Maximum Investment |
Varies by state. Some states allow lifetime account balances as high as $305,000 | Up to $20,000 | No limit | Up to $30,000 per year |
Minimum Investment |
Depends on program, but normally from $25/month to $50/month, with some managers requiring auto monthly deduction from bank or payroll | Varies by provider/investment | Varies by provider/investment | $50 per year |
Qualified Higher Educational Expenses |
Tuition, fees, books, supplies, room and board, and equipment | Tuition, fees, books, supplies, room and board, and equipment. Elementary and secondary education expenses also qualify. | Any expense | Tuition and fees only |
Financial Aid |
Saving Plans: Parents' assets Prepaid Plans: May reduce aid dollar-for-dollar |
Beneficiary's assets | Beneficiary's assets |
Parents' assets if education expenses are for child. Student's assets if education expenses are for oneself. |
Income Restriction |
No | Yes | No | No restriction on purchases. However, income restriction for excluding earnings from federal income tax. |
Flexibility |
Earnings on non-qualified withdrawals taxed at distributee's rate plus an additional 10% tax | Earnings on non-qualified withdrawals taxed at distributee's rate plus an additional 10% tax | Money can be withdrawn by the beneficiary when he/she becomes legal age. Money can be used for any purpose. | Can be redeemed after 6 months. A 3-month earnings penalty applies to redemption within 5 years of issuance. |
Control of Account |
Account holder | Parent or other responsible individual | Student takes control once custodianship ends | Bondholder |
Reprinted with the permission of College Parents of America. © 2007 CollegeParents.org
Ask a Question
Have questions about this article or topic? AskToday on Education.com
HOME COOKING
10 Ways to Spice Up Your Barbecue
BOOK PICKS
Summer Reading
CELEBRATION
Happy Graduation
Local SAT & ACT Classes
Popular Articles
- 20 Great Graduation Quotes
- Examining Possible Causes of ADHD
- Can Inventiveness Be Taught?
- What Do Test Scores Really Say About a School?
- Great Gifts for Middle School Grads
- Unraveling the Mystery of the Allergy Epidemic
- 9 Ways to Encourage Early Literacy
- Ten Great High School Graduation Gifts
- Is High-Stakes Testing Cheating Your Kid?
- Picky Eaters: Tips for Tackling and Myths Debunked
Add your own comment