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College Funding Options

How can you cover your child’s future college costs? Saving early (and often) may be key for most families. Here are some college savings vehicles to consider.


529 College Savings Plans

Offered by states and some educational institutions, these plans allow you to save up to $15,000 per year for your child’s college costs without having to file an I.R.S. gift tax return. A married couple can contribute up to $30,000 per year. (An individual or couple’s annual contribution to a 529 plan cannot exceed the yearly gift tax exclusion set by the Internal Revenue Service.) You can even front-load a 529 plan with up to $75,000 in initial contributions per plan beneficiary – up to five years of gifts in one year – without triggering gift taxes.. (1,2)

529 plans commonly feature equity investment options that you may use to try and grow your college savings. You can even participate in 529 plans offered by other states, which may be advantageous if your student wants to go to college in another part of the country. More than 30 states offer some form of a tax deduction for 529 plan contributions. (1,2)


Earnings from 529 plans are exempt from federal tax and generally exempt from state tax when withdrawn, so long as they are used to pay for qualified education expenses of the plan beneficiary. If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or another family member) without tax consequences. (1)


Grandparents can start a 529 plan (or other college savings vehicle) just like parents can. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself. (1)


These plans now have greater flexibility. Thanks to the federal tax reforms passed in 2017, up to $10,000 of 529 plan funds per year may now be used to pay qualified K-12 tuition costs. (2,3)


Coverdell ESAs