3.7 Education Savings: 529 & Coverdell
Education savings plans provide tax-exempt growth for educational expenses from kindergarten through higher education.
Key FINRA Exam Takeaways
- 529 Plans: Municipal fund securities; after-tax contributions; federal tax-free qualified education distributions.
- K-12 Tuition: Up to $10,000 per year per student can be used for elementary/secondary tuition.
- 5-Year Gift Tax Frontload: Can contribute up to 5 times the annual gift exclusion in 1 year without gift tax.
- Coverdell ESA: Maximum $2,000 annual contribution per child; must be distributed by age 30.
Knowledge Checkpoint • Section 3.7
What is the maximum annual contribution limit per beneficiary for a Coverdell Education Savings Account (ESA)?