ExpertEasy1 markMultiple Choice
CPA · Question 16 · Area I: Individual Compliance and Planning
Which of the following is a tax advantage of a Section 529 Qualified Tuition Program compared to a Coverdell ESA?
Which of the following is a tax advantage of a Section 529 Qualified Tuition Program compared to a Coverdell ESA?
Answer options:
A.
Contributions are federally tax-deductible.
B.
There are no income phase-out limits for contributors.
C.
Funds can be used for K-12 expenses without limit.
D.
Investment control remains fully with the contributor.
How to approach this question
Recall the contribution rules. Coverdell ESAs have AGI phase-outs preventing high earners from contributing. 529 plans do not have income limits for contributors.
Full Answer
B.There are no income phase-out limits for contributors.✓ Correct
IRC §529 vs §530. Coverdell ESAs (IRC §530) have contribution limits phased out at higher AGI levels. Section 529 plans do not have income limitations for contributors.
Common mistakes
Assuming contributions are federally deductible (they are often state deductible, but not federal).
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