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Once you've decided to invest for college, the next step is to understand your choices. Review the account types below to see how they compare.
Money can be used for qualified expenses at any public, private or religious elementary or secondary school; and eligible post-secondary 2- or 4-year colleges, vocational/technical schools, or graduate schools anywhere in the country-not just in Kansas. (Limitations apply. See plan details.)
Earnings, distributions and transactions are reported to the IRS under the minor's Social Security number and are taxed at the minor's tax rate.
Withdrawals are tax free if used for qualified expenses. The money in the CESA must be used by the time a beneficiary reaches their 30th birthday.
Withdrawals are reported to the IRS under the minor's Social Security number and are taxed at the minor's tax rate.
Contributions may be limited or restricted depending on your income level.
529 plans are state-sponsored programs that allow you to contribute towards higher education goals for you, your children, grandchildren or other loved ones.
Coverdell accounts (also known as Coverdell ESAs or CESAs) are federally sponsored custodial accounts that allow an adult to open an account for students under the age of 18.
UTMAs allow minors to invest for any purpose—including education—and take advantage of children's taxation rates.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
The earnings portion of non-qualified withdrawals is subject to federal and state income taxes and a 10% federal penalty.
The availability of tax or other state benefits (such as financial aid, scholarship funds and protection from creditors) may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors.