| ESA | 529 Plan | |
|---|---|---|
| Tax-free withdrawals | Qualified expenses for kindergarten through college | Qualified expenses for college; up to $10,000 for primary or secondary school tuition* |
| Investment options | Many | Limited |
| Income eligibility limit for contributors | Annual contributions are capped at $2,000 for joint filers with a modified adjusted gross income (MAGI) up to $190,000 and are gradually reduced for MAGI between $190,000 and $220,000. Incomes above $220,000 are ineligible.† | None‡ |
*Check with the state's 529 plan rules to see if they permit this option. Not all states follow the new federal tax rules. You may be subject to state income tax and penalties for using 529 amounts for K-12 tuition expenses.
†Annual contributions for single filers are capped at $2,000 for MAGI up to $95,000, and are phased out for MAGI between $95,000 and $110,000.
‡Gift taxes may apply if you contribute more than $18,000 per year ($36,000 for couples) in 2024. It's also possible to contribute a lump sum of up to $90,000 to one or more 529 college savings plan in a single year ($180,000 for couples) without being subject to the gift tax. However, if you contribute more money on behalf of the same child during those five years, you may trigger the gift tax.