- Tax-free earnings: Contributions to a CESA grow tax-free, and withdrawals for qualified education expenses are also tax-free. This can provide a significant tax advantage over other savings options, such as regular savings accounts or taxable investment accounts.
- Flexible contribution limits: CESAs have annual contribution limits that vary depending on the account owner's income and the beneficiary's age. However, there are no income phase-out limits, so even high-income earners can contribute to a CESA.
- Broad range of qualified education expenses: CESAs can be used to pay for a wide range of qualified education expenses, including tuition, fees, room and board, books, supplies, and even certain computer equipment. This flexibility makes CESAs a valuable tool for saving for college or other higher education expenses.
- Estate planning benefits: CESAs can also provide estate planning benefits. Unlike other tax-advantaged savings accounts, such as IRAs, CESAs are not subject to required minimum distributions during the account owner's lifetime. This means that assets can be left in a CESA and grow tax-free for the benefit of future beneficiaries.
CESAs are a valuable savings tool for families looking to save for future education expenses. They offer a number of tax advantages and flexibility, making them a great choice for those looking to save for college or other higher education costs.