Saving and paying for education in New York
A little money saved often can grow into a big help. Different accounts do different jobs. This guide shows each one in plain words, with examples.
- For college, career school or an apprenticeship: New York's 529 plan is the main account. New York taxpayers can deduct up to $5,000 a year ($10,000 married filing jointly).
- For K-12 costs: be careful. Federal law changed in 2025, but New York still takes back its tax break on 529 money used for K-12 tuition.
- For a person with a disability: look at NY ABLE. From 2026 it is open if the disability began before age 46.
- For a baby born 2025 to 2028: a Trump account can get a one-time $1,000 federal deposit.
🧭 Which account fits your family?
Answer 4 short questions. You will get a list of accounts to read about first. Nothing is saved or sent.
📊 All the accounts side by side (2026)
On a phone, each account is a card. "NY" means New York State income tax.
| Account | Who can open it | Federal tax | New York tax | What the money can pay for | Yearly limit | FAFSA (college aid form) | If it is not used for school |
|---|---|---|---|---|---|---|---|
| 🎓 NY 529 College Savings Program | Almost anyone with an SSN or ITIN and a U.S. address: parents, grandparents, friends. No age or income limit. | Growth is tax-free if spent on qualified costs. | Deduct up to $5,000 a year ($10,000 married filing jointly) of what you put in. NY takes the deduction back on nonqualified withdrawals, K-12 tuition and rollovers to another state's plan. | College, career school, registered apprenticeships, up to $10,000 of student loans (lifetime), credential programs*; K-12 up to $20,000 a year (federal)* | No yearly limit. Gifts over $19,000 per giver per child need a gift tax return. | Parent-owned: a parent asset. Grandparent-owned: not listed. | Change to another family member, roll up to $35,000 to the student's Roth IRA, roll to ABLE, or take it out (tax + 10% on earnings + NY add-back). |
| 📘 Coverdell ESA | Opened for a child under 18. Givers must be under the income limit. | Growth is tax-free if spent on qualified costs. | No NY deduction. | K-12 tuition, tutoring, books, supplies, computer and internet used for school; college. | $2,000 per child, from everyone together. | Usually treated like a 529 (check). | Must be used or moved to a family member under 30 by age 30; otherwise tax + 10% on earnings. |
| ♿ NY ABLE | A person whose disability began before age 46 (from Jan. 1, 2026). | Growth is tax-free for qualified disability expenses. | Ask NY ABLE about state tax. | Education, housing, transportation, health, job training, assistive technology and more. | $20,000 (2026), from everyone together; workers may add more. | Ask the college aid office. | Stays for the person's disability costs. First $100,000 does not count for SSI. |
| 🧒 UTMA / UGMA custodial account | An adult opens it for a child at a bank or broker. | No special break. Child's investment income over $2,700 (2026) is taxed at the parents' rate. | No NY deduction. | Anything that benefits the child. | No limit (gift tax rules apply). | The student's asset (counts more). | Becomes the child's at 21 (sometimes 18). The child decides. |
| 💵 U.S. savings bonds (EE, I) | Bond owner must be 24+ when buying for the education break. | Interest can be tax-free for college tuition, under income limits. | Savings bond interest is not taxed by states. | College tuition and fees (or move into a 529/Coverdell). | TreasuryDirect purchase limits apply. | An asset of the owner. | Keep it or cash it; interest is taxed federally as usual. |
| 🏦 Parent's Roth IRA | A person with earned income, under the Roth income limits. | Your contributions can come out tax-free any time. Earnings: no 10% penalty for college, but may be taxed. | Follows federal treatment in most cases (ask). | Anything; college costs avoid the 10% penalty. | $7,500 (2026), up to your earned income. | Not listed as an asset. Withdrawals count as income later. | Stays as your retirement money. |
| 🇺🇸 Trump account | A parent or guardian, for a U.S. child under 18 with an SSN. | Grows tax-deferred; after 18 it works much like a traditional IRA. | Not settled; ask. | Locked until the year the child turns 18. | $5,000 from family; plus a one-time $1,000 federal deposit for children born 2025-2028. | Not settled; ask. | Stays invested as retirement-style savings. |
| 💰 High-yield savings | Anyone, at an insured bank or credit union. | Interest is taxed each year. | Interest is taxed. | Anything, any time. | None. | An asset of the owner. | It is yours to use. |
* New York has not yet decided whether withdrawals for the new K-12 costs (other than tuition) and for credential programs are qualified for New York. K-12 tuition is nonqualified for New York. See the 529 page.
📏 How much can go in each year? (2026)
📚 Read the details
🎓 New York's 529 plan
How to open, the NY deduction, K-12 rules, Roth rollover, grandparents, FAFSA, a growth calculator and 6 examples.
Open the 529 guide → 7 more accounts📘 Other education accounts
Coverdell, NY ABLE, UTMA/UGMA, savings bonds, Roth IRA, Trump accounts and high-yield savings, each with an example.
Compare the others → Help paying now🧾 Paying for school and college
Tax credits, Pell, TAP, Excelsior, FAFSA, child care credits, Empire State Child Credit, free school meals and a yearly calendar.
See help and dates → Goal100 plans🧾 Taxes and your subscription
Educator expense deduction, 529 notes for learning materials, and receipts.
Read tax notes →Three ideas that help every family
⏰ Start early, even small
Time does a lot of the work. See the example on this page.
🔁 Make it automatic
A monthly transfer on payday is easier than remembering.
🎁 Ask for gifts to the account
Birthdays and holidays: relatives can add to a 529 instead of buying toys.
Two families each put $50 a month in a 529. We assume the money grows 5% a year (an assumption; real returns go up and down and can be negative).
- Family A starts when the child is born: 18 years × 12 months × $50 = $10,800 put in. With 5% growth it becomes about $17,460.
- Family B starts when the child is 11: 7 years × 12 × $50 = $4,200 put in. With 5% growth it becomes about $5,016.
- Family A put in $6,600 more, but ended with about $12,444 more. The extra came from growth over time.
❓ Questions families ask
Do I have to use New York's 529 plan?
No. Anyone can use any state's plan. But the New York deduction only applies to contributions to New York's 529 College Savings Program (the Direct Plan or the Advisor-Guided Plan). If you pay New York tax, that deduction is a strong reason to look at New York's plan first.
Is a 529 only for a 4-year college?
No. It can pay for community college, trade and career schools that take federal aid, registered apprenticeships, and up to $10,000 (lifetime) of student loans. Federal law also allows some K-12 costs, but read New York's rules first.
Will saving hurt my child's financial aid?
A parent-owned 529 is counted as a parent asset on the FAFSA, which affects aid only a little compared with money in the child's name. Retirement accounts are not listed as assets. See the comparison table and ask the college's aid office.
What if my child gets a scholarship or does not go to college?
You can change the 529 to another family member, keep it for later, roll up to $35,000 (lifetime) into the student's Roth IRA if the rules are met, or take the money out. If you take it out for a scholarship, the 10% extra federal tax is waived up to the scholarship amount, but earnings may still be taxed.
Is this page selling an account?
No. Goal100 does not sell or recommend any financial product and earns nothing from these accounts. We link only to official sources.
🔗 Official sources (checked November 7, 2026)
- NY 529 Direct Plan, Tax benefits: nysaves.org tax benefits
- NY 529 Direct Plan, FAQs (who can open, K-12, gifts): nysaves.org/faqs
- NY 529 Direct Plan, Highlights (no minimum; Advisor-Guided Plan): nysaves.org highlights
- 26 U.S.C. §529 (K-12 limit, apprenticeships, loans, Roth rollover): law.cornell.edu/uscode/text/26/529
- 26 U.S.C. §530 (Coverdell ESA): law.cornell.edu/uscode/text/26/530
- IRS, ABLE accounts (age 46 from 2026; $20,000 for 2026): irs.gov ABLE accounts
- Social Security, SSI Spotlight on ABLE accounts ($100,000): ssa.gov ABLE spotlight
- NY ABLE program: mynyable.org
- IRS, Rev. Proc. 2025-32 (2026 gift exclusion $19,000; kiddie tax $1,350; savings bond limits): irs.gov rp-25-32.pdf
- IRS, 2026 IRA limit $7,500 (IR-2025-111): irs.gov newsroom
- IRS, Trump accounts guidance (IR-2025-117): irs.gov newsroom
- IRS, Trump accounts sign-up update (IR-2026-42): irs.gov newsroom
- 26 U.S.C. §135 (savings bond education exclusion): law.cornell.edu/uscode/text/26/135
- Federal Student Aid Handbook 2024-25, Filling out the FAFSA (529 as parent asset): fsapartners.ed.gov
- NY Estates, Powers and Trusts Law §7-6.20 (UTMA ends at 21 or 18): nysenate.gov
- IRS Publication 970, Tax Benefits for Education: irs.gov/publications/p970