College Savings


Coverdell ESA

  • Contributions are made with after-tax dollars, and are treated as a gift from you to the beneficiary.
  • Contributions can be made by parents and other adults; total contribution limit is $2,000 per child.
  • Contributions are not tax deductible but all earnings are tax deferred.
  • No state tax deduction offered for investing with a Coverdell ESA.
  • Withdrawals are tax-free when the funds are spent on qualified education expenses for K-12 and college.
  • Contribution limit is $2,000 per year per child until the child’s 18th birthday.
  • Anyone can contribute to a Coverdell ESA as long as their modified adjusted income for the year is less than $110,000 ($220,000 in the case of a joint return).
  • No funding is permitted once the beneficiary reaches age 18.
  • Self-direct your investments (similar to an IRA).
  • Contributions are placed into an account in the beneficiary’s name, and must be fully withdrawn by the time the beneficiary reaches age 30, or else it will be subject to tax and penalties.

529 Plan

  • State-sponsored Plans are available through most states with many investment options offered.
  • The dollar amount of allowable contribution varies from state to state and can be as high as $380,000.
  • Assets in the account remain under the donor’s control even after the student is of legal age.
  • No age limit requirement to have a 529 Plan.
  • There are no income limitations on donors making contributions to a 529 Plan.
  • May be withdrawn tax-fee for college expenses, but cannot be used for education expenses incurred below the post-secondary level.
  • Earnings are exempt from federal taxes (as are withdrawals) if they are used for qualified post-secondary educational expenses.
  • Most states offer tax deductions for using a 529 Plan.
  • In almost all cases, residents do not pay state income tax on qualified withdrawals from home-state plans.
  • If funds are withdrawn for purposes other than education, earnings are subject to a 10% penalty as well as federal income tax.  State may assess their own penalties.  Any additional tax is the obligation of the person making the contribution.
  • Contributions to 529 plans are considered gifts for tax purposes.  In 2019, gifts totaling up to $15,000 per individual will qualify for the exclusion.


You can elect either or both options for your children.  Just because you have a Coverdell ESA, does not mean you cannot also open a 529 Plan for the same child.  All income limit and contribution limits reflect the IRS 2018 guidelines

Please email us at or call us at 914-941-5533 and we can help you understand the options available to you in opening and managing these accounts.