Compare College Savings Options
There are many options available to help you save for higher education expenses. Our comparison chart outlines the key differences between 529 plans, Coverdell Education Savings Accounts and UGMA/UTMA Accounts. Your Financial Advisor can help you sort through the choices to come up with the best decision for your needs and budget.
|The IAdvisor 529 Plan||Coverdell ESA||UGMA/UTMA|
|Control of account||Plan owner (usually a parent) has control throughout the life of the account||Trustee or custodian has control until age of majority, then assets belong to child||Custodian has control until age of majority, but assets always belong to child|
|Uses and restrictions||Qualified expenses at eligible institutions1||Qualified expenses at public or private primary, secondary, or post-secondary schools||No specific educational requirements; funds must be used for benefit of minor|
|Contribution limit||Allows $420,000 per beneficiary||$2,000 per minor child per year (2017)||Unlimited|
|Income eligibility||No limits||Phases out for single filers at $95,000 to $110,000; for joint filers $190,000 to $220,000||No limits|
|Age restrictions for beneficiary||None||Can only contribute until child reaches 18 and must withdraw funds before age 30||Can only contribute until child reaches age of majority|
|Change in beneficiary||Can be transferred to another eligible member of the family at any time2||Can be transferred to another eligible family member(< 30 yrs. old)||Not permitted since assets are owned by minor child|
|Federal income tax treatment||Earnings and appreciation in value are free from federal income tax if used for qualified higher education expenses3||Federal income tax-free if used for K–12 and qualified higher education expenses before beneficiary reaches age 30||Earnings and gains taxed to minor; first $1,000 of unearned income is tax exempt; unearned income over $2,100 for certain children through age 23 is taxed at parents' rate|
|Federal estate tax treatment||Value removed from account owner's gross estate||Value removed from owner's gross estate||Value removed from contributor's gross estate|
|Federal gift tax treatment||Contributions treated as completed gifts, subject to $14,000 annual exclusion, or up to $70,000 with 5-year accelerated election ($28,000/$140,000 respectively for spouses who gift split)4||Contributions treated as completed gifts; 2017 annual contribution limit is $2,000||Transfers treated as completed gifts, subject to $14,000 annual gift exclusion|
|Federal financial aid||Counted as parental asset if parent is account owner||Counted as asset of trustee or custodian, typically the parent||Counted as student's asset|
|Federal penalties on nonqualified withdrawals||Ordinary income taxes plus a 10% IRS penalty on earnings||Ordinary income taxes plus a 10% IRS penalty on earnings||None|
|State tax deduction||Up to a $3,239 deduction (adjusted annually for inflation) from Iowa taxable income per beneficiary per year (Adjusted annually for Inflation)5||None||None|
|State penalties for Iowa taxpayers||If withdraws are not qualified, the deduction must be added back to Iowa taxable income||None||None|
1Eligible institutions include all post-secondary institutions that participate in the Federal Financial Aid Program.
2Please see the Program Description for definition of a “family member.”
3Non-qualified withdrawals may be subject federal and state taxes and an additional federal 10% tax.
4In the event the contributor does not survive the five-year period, a pro-rated amount will revert back to the contributor’s taxable estate.
5If withdrawals are not qualified, the deductions must be added back to Iowa taxable income.