What's the Difference Between a 529 Plan and a Coverdell Education Savings Account?

A 529 plan and a Coverdell Education Savings Account (ESA) are both tax-advantaged accounts designed to help pay for education expenses, but they have different rules and limits. Both accounts let your money grow tax-free, and withdrawals are tax-free when used for qualified education expenses — but Coverdell accounts can also be used for K-12 private school tuition, while 529 plans are primarily designed for college (though they also allow up to $10,000 per year for K-12 tuition). The big practical difference is contribution limits: Coverdell accounts cap contributions at $2,000 per year per beneficiary, while 529 plans have no annual limit (though contributions above $18,000 per year per beneficiary count against the gift tax exclusion). Coverdell accounts also have income limits for contributors, while 529 plans are available to everyone regardless of income. For most families, the 529 plan's higher limits and wider investment options make it the primary choice.