Compare College Savings Plans

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.

Comparison Chart

  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 (2019) 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 24 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 $15,000 annual exclusion, or up to $75,000 with 5-year accelerated election ($30,000/$150,000 respectively for spouses who gift split)4 Contributions treated as completed gifts; 2019 annual contribution limit is $2,000 Transfers treated as completed gifts, subject to $15,000 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 $3,387 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

Eligible institutions include all post-secondary institutions that participate in the Federal Financial Aid Program.

Please see the Program Description for definition of a “family member.”

Non-qualified withdrawals may be subject federal and state taxes and an additional federal 10% tax.

In the event the contributor does not survive the five-year period, a pro-rated amount will revert back to the contributor’s taxable estate.

If withdrawals are not qualified, the deductions must be added back to Iowa taxable income.