Learn why millions of people saving for higher education have turned to 529 plans for their attractive combination of benefits.
|529 plan||Coverdell||UGMA/UTMA||Taxable investment account|
|Anyone can contribute regardless of income level||•||•||•|
|Withdrawals for qualified expenses are free from federal taxes||•||•|
|Some states offer tax deductions/credits||•|
|Account owner always controls the account||•||•|
|Available to pay for K–12 expenses||•||•||•|
|Unlimited changes to investment mix permitted||•||•||•|
|Beneficiary changes permitted||•||•||N/A|
A breakdown of the benefits of 529s
With a 529 plan such as CollegeAmerica®, you can save for anyone — your child or grandchild, a niece or nephew, a friend or even yourself.
- Earnings in 529 accounts can grow free from federal tax, and withdrawals for qualified higher education expenses are free from federal tax.
- A number of states allow a deduction from (or a credit against) state taxes for all or part of a contribution to certain 529 plans.
- You can contribute up to $14,000 ($28,000 for married couples) annually without gift-tax consequences. Under a special election, you can invest up to $70,000 ($140,000 for married couples) at one time by accelerating five years’ worth of investments.
- There are no income limits. You can contribute no matter how much you earn.
- Though plans are administered by individual states, investors can choose from any plan, regardless of where they live.
- You can contribute until your account value reaches $350,000.1
- Investors can use a 529 plan to pay qualified higher education expenses at any eligible educational institution, not just schools in the state sponsoring your plan.
- You, the account owner, rather than the beneficiary, maintains control of account assets and determines the timing and amount of distributions.
- You can change beneficiaries without penalty provided the new beneficiary is a member of the previous beneficiary’s family.
A few things to note about 529 savings plans
- If you withdraw money from your 529 college savings plan account for purposes other than higher education, your earnings will be subject to federal income tax and possibly a 10% federal tax penalty.
- Your 529 college savings plan holdings could impact your beneficiary’s ability to qualify for grants and student loans. Ask your financial adviser for details.
Visit our Other savings options page to learn more about Coverdell Education Savings Accounts and UGMA/UTMA accounts.
1 No more contributions will be accepted once the account value reaches $350,000 through investments or growth.
Depending on your state of residence, there may be an in-state plan that provides tax and other benefits not available through CollegeAmerica. Before investing in any state’s 529 plan, you should consult your tax adviser. If withdrawals are used for purposes other than higher education, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.