NOW WHAT IS CONSIDERED UPPER INCOME.....
But before you rush to fund an Education IRA, you should realize that under the federal aid formulas, an Education IRA is considered an asset of the owner of the account. Since the tax law refers to the student as the account holder, these accounts are considered a student asset that will be assessed at the 35% financial aid assessment rate. The untaxed investment income generated by an Education IRA during a base income year will also be counted as part of the student's untaxed income. Under the institutional methodology, the College Board will consider these funds as a parent asset. The investment income from an Education IRA will not be considered part of the 2001 base year income that must be reported on the 2002-2003 version of the PROFILE. Also, for 2001 contributions to and withdrawals from Education IRAs can eliminate your ability to claim other more substantial educational benefits that are part of the Taxpayer Relief Act of 1997.
At the present time, it seems that Education IRAs are only appropriate for upperincome families who are absolutely certain they will not qualify for financial aid.