College Savings
Supporting Long-Term Education Planning with Smart, Structured Strategies
Education costs can add up quickly—but planning ahead can make them more manageable. If you're saving for a child, grandchild or another future student, Alamo Capital provides tools to help you invest with purpose and tax efficiency. From 529 plans to Coverdell ESAs, we provide access to flexible, tax-advantaged accounts tailored to education goals at every stage—from kindergarten through college and beyond.
529 College Savings Plans
What is a 529 Plan?
- Savings Plans: Contributions are invested in market-based portfolios, typically mutual funds, with growth tied to investment performance. Many offer age-based options that automatically shift to more conservative allocations as the student nears college.
- Prepaid Tuition Plans: These allow you to lock in today’s tuition rates at participating public colleges and universities. Performance is tied to tuition inflation, not market growth.
Note: Prepaid plans may be offered by states or specific institutions, while savings plans are only administered by states.
Qualified Expenses
- Tuition, fees, books, and required equipment
- Room and board (for at least half-time students)
- Vocational and trade schools
- Some international institutions
Tax Benefits
- Contributions grow tax-deferred
- Qualified withdrawals are tax-free at the federal level
- Some states offer additional tax incentives, matching grants, or financial aid advantages for in-state residents
Withdrawals & Penalties
- The beneficiary’s death or disability
- Use of scholarship or veteran’s education assistance
- Other nontaxable education-related benefits
Coverdell Education Savings Accounts (ESAs)
Coverdell ESAs, also known as education IRAs, allow for tax-advantaged saving toward qualified education expenses—including those for primary and secondary school, as well as college.
Key Features
- Annual contribution limit: $2,000 per beneficiary
- Funds grow tax-deferred and are withdrawn tax-free when used for qualified expenses
- Qualified expenses include tuition, books, uniforms, and more for K–12 and postsecondary institutions
Eligibility
Income limits apply:
- Single filers: phase-out from $95,000 to $110,000
- Joint filers: phase-out from $190,000 to $220,000
Important Considerations
- Funds must be used by the beneficiary’s 30th birthday
- Unused funds or non-qualified withdrawals may be subject to tax and a 10% penalty on earnings
Choosing the Right Plan
529 plans and Coverdell ESAs offer different advantages, and the best fit depends on your financial situation, investment goals, and education timeline. Our team can walk you through contribution rules, tax benefits, and how these accounts align with your overall investment strategy.
Feature | 529 College Savings Plan | Coverdell Education Savings Account (ESA) |
|---|---|---|
Primary Use | Higher education expenses | K–12 and higher education expenses |
Annual Contribution Limit | Varies by state (often $300K+ lifetime) | $2,000 per beneficiary |
Income Limits | None | Yes (phased out at $95K–$110K single / $190K–$220K joint) |
Tax Benefits | Tax-free growth and withdrawals for qualified expenses | Same |
Eligible Expenses | Tuition, fees, books, equipment, room & board | Same + K–12 expenses (tuition, supplies, etc.) |
Account Ownership | Controlled by the account owner | Controlled by custodian until beneficiary turns 18 |
Age Limits | No age restrictions | Funds must be used by beneficiary’s 30th birthday |
Let’s Talk About College Planning
We’re here to help you navigate college funding options with clarity and confidence. From getting a head start to making up ground later, our specialists can guide you through the next steps.