When you’re considering a private school education for your child, there are so many issues to take into account. And, undoubtedly, at the top of that list is the question of how you will pay for the opportunity. KNOWAtlanta Magazine asked David E. Mattox, CFP®, Vice President, Sr. Financial Consultant with Charles Schwab’s Atlanta Cobb branch, about the different savings account options available for parents.

• The 529 college savings account was amended in 2019 to allow families to use the balance not only for qualified college needs, but also up to $10,000 per year for qualified K-12 expenses. These 529 plans permit significant contributions, with many allowing $400,000 or more over an account’s lifetime. And based on the fact that in 2019 you can gift an unlimited number of individuals $15,000 a year ($30,000 per couple) without being subject to gift taxes, a 529 account allows you to accelerate a gift tax-free lump sum contribution of up to $75,000 ($150,000 per couple) by electing to treat the gift as though it were spread evenly over five tax years.
• An Education Savings Account, also known as a Coverdell ESA, allows you to contribute $2,000 per year to a child’s account up to the age of 18. There are tax implications of going over this annual amount, so it’s a good idea to make sure you don’t over-contribute. Like the 529, the ESA can be used to pay for qualified education expenses for college and K-12 education. One important distinction: not everyone can contribute to an ESA.
  • If you are married and filing jointly and your income is above $220,000, you are not able to use this savings tool.
  • If your income is between $190,000 and $220,000, you can only make a partial contribution.
  • If you are a single filer, you can make a partial contribution if your income is between $95,000 and $110,000, but single filers are excluded from this tool if you make over $110,000.
• A custodial account is another way to save for your child, but in the State of Georgia, any money not used for the benefit of the minor becomes theirs at age 21. This varies from state-to-state, so it’s a good idea to review this with your financial advisor when you set up the account. Also, there is no tax deferral on a custodial account, so your CPA needs to be aware of the account to help you determine if you and your child will owe taxes on the account each year. You can put an unlimited amount in a custodial account, but that is considered an irrevocable gift to the minor.

For more information, visit schwab.com.