What education savings options are available in the US?

COVERDELL EDUCATION SAVINGS ACCOUNT - This plan allows you to put $2,000 after-tax dollars away annually per beneficiary. Withdrawals of principal or earnings for qualified education expenses are tax-free! These funds can be used for expenses from Kindergarten through to University.

HOPE SCHOLARSHIP CREDIT - This is a tax credit worth a total of $1,500 for each of your children over a two-year period. In the first year, you are eligible for a $1,000 tax credit and $500 in the second year. There are income restrictions in qualifying for this credit.

LIFETIME LEARNING CREDIT - This tax credit is worth $2,000 annually for each taxpaying family as long as there is a child in school fulltime. There are income restrictions in qualifying for this credit.

UTMA - You can invest an unlimited amount of funds in these accounts but the tax bill goes to the child . . . until the "kiddie tax" kicks in. You also need to be aware that your child gets unrestricted access to the entire account at the age of majority for the state you reside in.

STATE COLLEGE SAVINGS PLANS - The 2001 changes to the tax laws made these plans suddenly very popular because any withdrawals for education expenses (room, board, books, tuition) are tax-free federally and possibly tax-free in your state as well. Known as Section 529 plans after their place in the Internal Revenue Code, these plans have become very popular in the US . There is also some estate tax planning advantages that may be applicable in your situation as well.

STUDENT LOAN INTEREST DEDUCTION - Similar to Canada , there is a deduction for any interest paid on student loans but there are income restrictions on your eligibility for this deduction.

COLLEGE TUITION DEDUCTION - There is a deduction of up to $3,000 for college tuition and related expenses but there are income restrictions on whether you qualify or not