Types of College Saving Accounts

College Saving Plans:

1.) 529 Plans 

The 529 college saving plan allows the contributor, who is the account holder, to establish an account for a student (the beneficiary) to pay the beneficiary’s qualified college expenses. The qualified expenses cover the following:

a.) Tuition 

b.) Room and board

c.) Books, computers, and other related items 

d.) Required college fees 

Contribution limits for 529 plans: 

Contribution limits can be up to $250,000 or more. Contributions can be made with after-tax money, and withdrawals are not subject to federal tax, and in most cases state tax, as long as the withdrawals are made for college expenses. 

2.) Coverdell Education Savings Accounts (Coverdell ESAs)

Coverdell ESAs is another type of college savings account. Contributions are made with after-tax money for the student, who is the beneficiary. Contributions must be made in cash on or before the date on which the beneficiary attains 18 years. The contribution limit for a Coverdell ESA is a maximum of $2,000 per beneficiary per year. However, in order to make the maximum contribution ($2,000) the adjustable gross income (AGI) for single tax filers is $95,000 or below, and for joint tax filers the AGI is $190,000 or below.