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||Investor 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
|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.