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529 Plans were created as a complement to prepaid tuition plans established by many states. Unlike prepaid tuition plans, there are generally no residency requirements.

529 savings plan monies can be used to pay for higher education costs at any accredited college, university or technical school in any state. This might be a college, graduate school, professional school, or a post-secondary vocational or trade school. The school may be either private or public; in-state or out-of-state.

This chart makes it easy to compare different savings vehicles side-by-side:

 

Comparison of college-savings investment-option benefits OklahomaDream 529 Plan Coverdell Education Savings Account UTMA/UGMA Account
Contribution limit Up to $300,000 $2,000 per student per year None
No limits on contribution age¹
Until 18 years of age Until child reaches maturity (18 or 21)
Account owner always remains in control of the account
Changes to beneficiary permitted
Withdrawals for qualified expenses are free from federal taxes²
Tax-free gifting of $14,000 (single filers) or up to $70,000 (single filers) with accelerated 5-year election³
State-tax deduction (Allows up to a $20,000 deduction from this calendar year’s Oklahoma income tax ($10,000 for single filers))

If married and filing jointly, you can gift up to $28,000 per year—and up to $140,000 if you choose the 5-year accelerated gifting election.
  1. Some state plans do have their own age and/or time limits.
  2. Withdrawals that are not used for qualified higher educational expenses may be taxed as ordinary income and may be subject to a 10% additional federal penalty tax.
  3. Per year per beneficiary. Note that if the Donor dies before the first day of the fifth calendar year, a portion of the contribution must be added back to the Donor’s estate for tax purposes.
AGI-2016-07-06-15825

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