Education Savings Accounts
Chapters in this video
- 0:00 Meet Carla, Timmy, and the two tax-free options
- 0:47 Coverdell ESA: the $2,000 tiny piggy bank
- 1:44 Coverdell MAGI phase-outs for contributors
- 2:13 529 plans and the $95,000 5-year gift tax averaging rule
- 3:16 Non-qualified 529 withdrawals: 10% penalty on earnings only
- 4:01 K-12 expenses: 529 tuition cap vs Coverdell flexibility
- 4:27 SECURE 2.0: rolling leftover 529 funds into a Roth IRA
- 5:31 Coverdell vs 529 side-by-side cheat sheet
- 6:13 Rapid-fire exam recap
What this video covers
- The Coverdell ESA $2,000 annual contribution cap per beneficiary and the age 30 forced distribution rule
- Modified Adjusted Gross Income (MAGI) phase-outs that apply to Coverdell contributors (and why 529 plans have no such income limits)
- 529 plan capacity: no federal contribution limit, the $19,000 gift tax reporting threshold, and the 5-year gift tax averaging rule that front-loads up to $95,000 ($190,000 married filing jointly)
- How non-qualified 529 withdrawals are taxed: ordinary income plus a 10% penalty on the earnings portion only, with contributions coming back tax-free
- The K-12 distinction: 529s allow up to $10,000/year for tuition only, while Coverdells cover a broader range of books, uniforms, and tutoring
- The three SECURE 2.0 requirements for a 529-to-Roth IRA rollover: 15-year account age, contributions older than 5 years, and a $35,000 lifetime cap per beneficiary
- Which features belong to which account when the exam puts them side by side: age limits, income limits, state sponsorship, and Roth rollover eligibility
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