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Education Savings

Invest in your education with a Coverdell Education Savings Account.

  • A Coverdell Education Savings Account (CESA) is a tax-advantaged trust or custodial account designed to help save for education expenses
  • Funds can be withdrawn tax free when they are used for qualified education expenses before the beneficiary's 30th birthday
  • Total contributions in all Coverdell Education Savings Accounts for a single beneficiary cannot exceed $2,000 per year
 
CollegeAmerica 529 College Savings Plan
Coverdell Education Savings Account
UGMA/UTMA
Income Limits
No income limits. Ability to contribute phased out for married couples with incomes between $190,000 and $220,000, and individuals with incomes between $95,000 and $110,000. No income limits.
Contribution Limits
No contributions allowed once account balance reaches $350,000. Contributions limited to $2,000 per year per beneficiary. No contribution limits.
Federal Income Tax Impact
Earnings can grow tax-free. Withdrawals for qualified higher education expenses free from federal tax. Earnings can grow tax-free. Withdrawals for qualified elementary, secondary and higher education expenses free from federal tax. First $1,000 of earnings tax-free for children under 19. Earnings between $1,000 and $2,000 taxed at child's rate; earnings above $2,000 taxed at parents' rate. All earnings for children 19 and older taxed at child's rate.*
State Income Tax Impact
Residents of Virginia, as well as several other states, receive state income tax deduction. No state tax deduction. No state tax deduction.
Oversight
Owner maintains control of assets, decides when withdrawals will be made. Beneficiary may assume control at age of majority (18 or 21 in most states). Beneficiary assumes control at age of majority (18 or 21 in most states).
Beneficiary Changes
Owner can change beneficiary without being subject to taxes or penalties if the new beneficiary is a family member. Account owner can change beneficiary assuming control of account. No beneficiary changes permitted.
Uses
Higher education expenses, such as tuition, room and board, and certain other required text books, supplies, fees and expenses, for community college, undergraduate and graduate school, and professional and technical training. Education expenses, such as tuition, room and board, and certain other required books, computer equipment, supplies, fees and expenses, for kindergarten through graduate school. Any use benefiting the child.
Non-qualified Withdrawal Penalties
Non-qualified withdrawals subject earnings to ordinary income taxes and a 10% federal tax penalty. Non-qualified withdrawals subject earnings to ordinary income taxes and a 10% federal tax penalty. Not applicable.

*Also applies to children who are full-time students under age 24 whose earned income does not exceed one-half their support.

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