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My wife and I are maxing out my 3-year old daughter's state 529 plan this month. She will then be fully vested. My question is this. Can my parents contribute to an Educational IRA for her this year? Could we then contribute to this Educational IRA the following years? They are now getting more attractive ($2,000 vice $500). Our state 529 only covers 5 years of tuition at the state run universities. We bear any other costs such as room and board or the difference in private school tuition which I know the Educational IRA can pay for. Any rules on tapping 529's and ED IRA's in the same year? I know we may not be able to claim her tuition on our taxes. That's fine as the tax free growth and use of 529 money will be well worth it. Any thoughts or references would be greatly appreciated. This will allow my wife and I to now start planning our vacations when our daughter is in school.

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I would recommend that you check out and
look at the various posts in the message board area. There is a
TON of information there, where Joe Hurley maintains the site.
I don't believe that you can contribute to the EduIRA this year,
but next year you can. Good luck with your savings.
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This is something I have run into, since I also would like to contribute to an EdIRA and 529 in the same year, for the same child. Alas, you can't. See the "caution" in, page 28, left-hand column. It states:

No contributions can be made to an education
IRA on behalf of a beneficiary if any amount is
contributed during the same year to a qualified
state tuition program on behalf of the same beneficiary.
Any amount contributed to the education IRA will be
treated as an excess contribution to the education IRA.

So, you can contribute to an EdIRA, but it's treated as an excess contribution, and I think there are stiff penalties you must pay.

Does this still apply under the new tax law? That, I don't know.


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