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Insights & Ideas

College Savings Plans

Take a look at the chart below to review the most popular college savings plan options. Each offers its own set of tax advantages, beneficiary options and penalties.

  Coverdell ESA 529 College Savings Plan UGMA/UTMA Account Mutual Funds
Allows you to Invest up to $2,00 tax free for any education level Invest tax-free for college Invest on behalf of a minor for any reason Invest in a mutual fund for any reason
Can you change beneficiaries? Yes Yes No Yes
What can it be used for? Primary, secondary and higher education Qualified college expenses Any expense for the child Any expense for the child
Who controls the account? Person establishing the account Person establishing the account Custodian until the child reaches the age of majority Person establishing the account
Are contributions state-tax deductable? No Varies by state No No
Is there state tax on earnings? Varies by state Varies by state Depends on age of child Yes
Is there federal tax on earnings? No, when used for qualified expenses * No, when used for qualified expenses * Depends on age of child. Yes
Maximum Contribution Per Beneficiary $2,000 per year Varies by state plan, usually $200,000-$300,000 per beneficiary None None
Penalties for non-qualified withdrawals Federal income tax plus 10% penalty; state penalties vary Federal income tax plus 10% penalty; state penalties vary No No
Income Limits for Contributions Single return: 110,000
Joint return: $220,000
None None None
Effect on Financial Aid Assets treated as account owner's Assets treated as account owner's Assets treated as child's Assets treated as account owner's

A financial advisor can help you determine which college savings vehicle is right for you. If you don't already have one, call us at 1-800-896-2645 for assistance.

* Earnings on non-qualified withdrawals may be subject to federal income tax plus a 10% federal penalty tax, as well as other state and local taxes.