College costs may be rising, but there are more choices for college saving today than ever before. Our comparison chart outlines the key differences between 529 plans, Coverdell Education Savings Accounts and UGMA/UTMA Accounts. While all these options have a place in the college planning equation, we believe the flexibility and high contribution limits of 529s set them apart.
Comparison Chart
Qualified expenses at public or private primary, secondary, or post-secondary schools
| Tomorrow’s Scholar 529 Plan | Coverdell ESA | UGMA/UTMA | |
|---|---|---|---|
| Control of Account | Plan owner (usually parents) has control throughout the life of the account | Trustee or custodian has control until age of majority, then assets belong to child | Custodian has control until age of majority, then assets belong to child |
| Uses and Restrictions | Qualified expenses at almost any elementary, secondary or post-secondary school | Qualified expenses at almost any elementary, secondary or post-secondary school | No restrictions |
| Contribution Limit | Tomorrow's Scholar allows $589,650 per beneficiary | $2,000 per minor child per year (2026) | Unlimited |
| Income Eligibility | No limits | Phases out for single filers at $95,000 to $110,000; for joint filers $190,000 to $220,000 | No limits |
| Change in Beneficiary | Can be transferred to another eligible member of the family at any time | Can be transferred to another eligible member of the family (< 30 yrs. old) | Not permitted |
| Federal income tax treatment | Federal income tax-free if used for qualified higher education expenses | Federal income tax-free if used for K–12 and qualified higher education expenses AND fully withdrawn by the time beneficiary reaches age 30 | If the child’s interest, dividends, and other investment income total more than $2,600, part of that income may be taxed at the parent’s tax rate instead of the child’s tax rate |
| Federal Estate Tax Treatment | Value removed from donor's gross estate | Value removed from donor's gross estate | Value removed from donor's gross estate unless donor remains as custodian |
| Federal Gift Tax Treatment | Contributions treated as completed gifts, subject to $19,000 annual exclusion, or up to $95,000 with 5-year accelerated election ($38,000/$190,000 respectively for spouses who gift split) | Contributions treated as completed gifts; 2025 annual contribution limit is $2,000 | Transfers treated as completed gifts, subject to $19,000 annual gift exclusion |
| Federal Financial Aid | Counted as parental asset if parent or dependent student | Counted as asset of trustee or custodian, typically the parent | Counted as student's asset |
| State Tax Benefit | Up to a $5,130 deduction from taxable income per eligible family member per year (if Wisconsin resident)1 | None | None |
| Penalties on Non-qualified Withdrawals | Ordinary income taxes plus a 10% IRS penalty on earnings | Ordinary income taxes plus a 10% IRS penalty on earnings | None |
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| Use tax-free for college loans and apprenticeships2 | Qualified distributions to pay for the beneficiary’s college costs, college loans, apprenticeships or K-12 tuition are free of federal and, in almost all cases, state taxes4,5,6 | None | None |
1 Please note that the principal portion of any rollover contributions may qualify for reducing WI taxable income; the portion attributed to growth is not eligible.
2 State tax treatment of apprentice program expenses and the repayment of student loans varies by state. Taxpayers who reside or have income in other states outside of Wisconsin should also consult with a qualified tax advisor before taking any such actions.
3 Only one state, Alabama, does not offer state tax-free withdrawals for qualified expenses for any plan but its own. It is important to review local state tax laws before withdrawing from a 529 to pay for K-12 tuition, rules surrounding these distributions vary between states. Some states do not consider these distributions to be qualified and/or may apply additional criteria in order for the distributions to be considered qualified.
4 Nonqualified withdrawals are subject to a 10% penalty on the earnings component of such withdrawal, unless such penalty is waived, as well as taxes at ordinary rates of the recipient on such earnings. States may also charge penalties and/or recoup tax credits/deductions previously claimed.