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Financial Services
Oklahoma Christian University
Wednesday, January 16, 2013

New Tax Law Resurrects Competitor To 529 College Savings Plans

The American Taxpayer Relief Act, signed into law Jan. 2, “breathes new life” into Coverdell Education Savings Accounts, which is a “flexible way to save tax-free for college and/or kindergarten through 12th grade expenses—even a computer,” Forbes reports. “The new tax law made permanent enhancements to Coverdell Education Savings accounts (known as education IRAs in their first incarnation). You can open an account for each child and put away $2,000 a year. Since the accounts work like IRAs where you save for retirement, you can make 2012 contributions through April 15, 2013. So if you’re opening a new account or adding to a dormant account, you can immediately stash away $4,000, earmarking $2,000 as a 2012 contribution and $2,000 for 2013. Like a 529 account, the money grows tax-free and is tax-free when withdrawn for education expenses.”

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