Education Savings Plans Flashcards
What is the maximum yearly contribution to a Coverdell ESA?
$2000 per year
What are the two types of education savings plans?
Coverdell ESAs
And 529 plans
What is the maximum contribution for 529 plans?
They vary from state to state, however typically they can be as high as $300,000 per year
What kind of expenses can you use the monies saved in a Coverdell ESA for?
Any type of education expense, including private grade and secondary school expenses
What can you use the monies saved in a 529 plan for?
It can only be used to pay for higher education college level or higher.
Which of the education savings plans is not open for use by high earning individuals?
Coverdell ESA’s
Which type of education savings plan does not have a phaseout rule and restricted contribution amounts for high earning individuals?
529 plans
In a Coverdale ESA, is the contributor allowed to deduct contributions from their taxable income?
The correct answer is no. Contributions are not tax-deductible
At what age of the beneficiary are contributions no longer permitted into a Coverdell ESA?
18 years old
Who is allowed to contribute to a Coverdale ESA?
Any individual is allowed to contribute into any Coverdale ESA. How ever no matter how many individuals are contributing to the education savings plan, the maximum yearly contribution remains $2000 per account
Johnny customer is a 16-year-old sophomore whose family wishes to start saving for his college education, his grandparents open a Coverdale ESA account for Johnny, his parents open another, separate Coverdale ESA account for Johnny as well, what is the maximum contribution per account per year?
No matter how many separate accounts are opened for Johnny customer, the maximum contribution total between the accounts is $2000. So his grandparents could contribute $1000 into account a. And his parents could contribute $1000 into account b.
Money withdrawn from a Coverdale ESA used to pay for qualified educational expenses is taxed or not taxed at the time of withdrawal?
The money will not be taxed as long as it is used to pay for a qualified educational expense
In a Coverdale ESA, if funds remain in the account once the beneficiary reaches the age of 30, what is the beneficiary allowed to do with those funds?
The funds may be transferred to a younger member of the family, brother or sister for example, to pay for their qualified educational expenses.
If the beneficiary reaches the age of 30 and has unexpended funds in the account and does not wish to transfer those funds to another qualified family member, all remaining funds will be taxed at a regular income rate plus a 10% penalty tax
Are contributions to a 529 plan deductible or not deductible to the contributors annual income tax?
Contributions are not deductible to a contributors federal income tax
What is the maximum amount per year that is allowed to be contributed into a 529 plan?
There is no maximum amount that can be contributed into a 529 plan, however any contribution into a college savings plan over the amount of $14,000 is subject to a federal gift tax, couple would be allowed to donate up to $28,000 and still avoid the federal gift tax.
