Yes, you can. And in certain situations you might want to.
With both types of accounts, earnings are free from federal tax when the money is used for qualified college expenses, including tuition, fees, room, board and books. At first glance, however, the 529 plan appears to be a better deal.
Families at any income level can participate in a 529. There's no limit on how much you can kick in each year, and lifetime contribution ceilings are generous. Plus, 24 states and the District of Columbia will let you deduct your contributions if you invest in your home state's plan.
On the other hand, with a Coverdell education savings account (ESA), no more than $2,000 per year can be saved for each beneficiary. Singles who earn more than $95,000, and married couples who earn more than $190,000, cannot fully fund an ESA.
But the ESA has a couple of advantages. For one thing, its tax-free earnings can be used for tuition at private elementary and secondary schools as well as colleges. Also, with an ESA you can pick pretty much any mutual fund or stock to invest in; you're not limited to a state plan's menu.
GETTING STARTED
