529 Qualified Tuition Plans or 529 Prepaid Tuition Plans are not the only options for future-conscious investors to save for their child s education. Other options include the Coverdell Education Savings Account which not only can it be used on college expenses but also on qualifying elementary and secondary school expenses without penalty. Like the other plans, the Coverdell Education Savings Account does penalize for non-qualifying expenditures. Tax-Free Earnings and Distributions: All earnings in a 529 plan are tax-free. Distributions are free from all federal income and most state income taxes when used for tuition or other qualified college expenses. This makes 529 plans as powerful as Roth IRAs for long-term savings.
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