What is the best way to save for private school expenses? In a 529 plan, Coverdell ESA or mutual Fund?

Answer:

If the goal is to put money in the plan towards private school expenses, then the Coverdell education Savings account (ESA) appears to be the best choice, because the profit is tax-deferred and are not taxed if distributions are used for eligible expenditure to education, a Category which covers the costs required for registration or participation in the said beneficiary at the right educational institution. Private schools are eligible educational institutions for the ESA, however, institutions 529 plan is not limited to College, University, vocational school or other educational institutions eligible to participate in student aid programs administered by the Department of education.

Keep in mind that the maximum amount that can be caused by ESA on behalf of any designated beneficiary is $ 2,000 per year.

How to put money in investment funds, earnings on mutual funds, may be taxed in the year earned.

Other options are described in IRS publication 970, available on www.irs.gov. To locate this publication, enter ‘970′ in the second search line and press “enter” button.

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