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Education Savings Account Comparison
|Educational Savings Account Features||529 Savings Plan*||Coverdell Education Savings Account|
|Income limitations||None||Adjusted Gross Income limits apply|
|Maximum yearly contribution per beneficiary||$60,000 in the first year of a five-year period without exceeding federal gift tax exclusion||$2,000|
|Account earnings||Tax-free if used for qualified expenses||Tax-free if used for qualified expenses|
|Ability to change beneficiaries||Yes||Yes|
|Control of withdrawals||Owner of account||Transfers to child when child reaches legal age|
|Investment options||Ready-made portfolios of securities||Wide range of securities|
|State tax deductible contributions||Varies by state||No|
|Qualified use of proceeds||Any accredited post-secondary school in the U.S. and some accredited international schools||Primary, secondary and/or higher education|
|Penalties for non-qualified withdrawals||10% additional tax on taxable distributions||10% additional tax on taxable distributions|
|Taxation of qualified withdrawals||Tax-free at the federal level when used for qualified expenses||Tax-free at the federal level when used for qualified expenses|
|Ownership of assets for financial aid purposes (may vary with private institutions)||Owner||Student|
KIS does not give tax or legal advice. The comments regarding tax treatment in this material simply reflects our understanding of current interpretations of tax laws as they apply to the products covered in this material. Since tax laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as it applies to your particular situation.
* You should consider many factors before deciding which 529 plan is most appropriate. Some of these factors include: the Plan's investment options and the historical performance of these options, the Plan's flexibility and features, the reputation and expertise of the Plan's investment manager, Plan contribution limits and the federal and state tax benefits associated with an investment in the plan. You should discuss the tax implications of 529 Plans with your legal and/or tax advisors, as features may vary significantly from state to state. While federal tax treatment of 529 Plans is identical regardless of the state Plan, state tax treatment varies. State tax treatment may vary for "in-state" and "out-of-state" residents. Generally, state tax laws affect the contributor by way of deductibility of money going into the account, and the beneficiary and/or contributor by way of the possible taxation of distributions coming out of the account. Please read the Plan Disclosure Document before investing. It includes details about the Plan's risks, charges and tax treatment. Most 529 Plans will accept both "in-state" and "out-of-state" applicants. Each state's 529 Plan must be evaluated based upon its own merits relative to your needs, and the tax effects on the contributor and the beneficiary.
- Withdrawals in excess of qualified higher education expenses may be subject to federal income taxes and a 10% additional tax on the amount included in income
- Plan holdings could reduce beneficiary's ability to qualify for grants and student loans
- Some states offer benefits for residents who invest in their state's plan, including deductions for contributions and/or exemptions from state tax for qualified withdrawals
Investment products are offered through Key Investment Services LLC (KIS), member FINRA/SIPC. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA). KIS and KIA are affiliated with KeyBank National Association (KeyBank).
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Investment and insurance products made available through KIS and KIA are:
KIS, KIA and KeyBank are separate entities, and when you buy or sell securities and insurance products you are doing business with KIS and/or KIA, and not KeyBank.