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Education Tax Breaks
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| Coverdell
Education IRA |
529 Savings Plan | 529 Prepaid
Tuition Account |
|
| Description | Tax-deferred or tax-free education savings account | Contribute to a state-sponsored education investment account to benefit anyone | Investment account that buys future tuition credits at today's price |
| Contribution Limit | $2,000 per year | $11,000 per beneficiary or $55,000 lump sum for five-year period | N/A |
| Contribution Deadline | April 15th | Varies by plan | Varies by plan |
| Tax Treatment of Withdrawals |
Tax-free if used for qualified expenses | Tax-free if used for qualified expenses (until 2010 under current law) | Tax-free if used for qualified expenses |
| Qualified Expenses include Room & Board? |
Yes | Yes | Yes |
| Qualified Expenses include Elementary & Secondary School? |
Yes | No | No |
| Penalty for Non-Qualified Withdrawals? |
Earnings taxed as ordinary income to contributor, plus 10% penalty | Earnings taxed as ordinary income to account owners, plus 10% penalty | Earnings taxed as ordinary income to account owners, plus 10% penalty |
| AGI Phase-outs or Limits? |
Yes - begins at $95,000 single, $190,000 MFJ | No | No |
| Must Use Funds by | Beneficiary age 30 | Varies by plan | Varies by plan |
| Effect on Financial Aid? | Considered an asset of the student | Considered an asset of the plan owner | Considered an asset of the student |
NOTE: The table includes only some of the basic facts about college savings plans that may impact your tax preparation and income tax planning. For more detailed information on college savings plan options, check with your tax professional. You may also find additional information at the following resources:
Quicken's Education Tax Breaks
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