Coverdell Education Savings Accounts

Congress created the Coverdell Education Savings Account (ESA) as a tax-deferred way to help parents save for education expenses for their children.

Earnings in the account grow tax-deferred and can be withdrawn tax-free for these qualified educational expenses: tuition, fees, books, supplies, equipment, and room and board. Money withdrawn for any other purpose is taxed and is also subject to a 10% penalty tax.

Coverdell ESA features

• You can set up an account on behalf of any child … not just your own
• You can contribute for children under 18 years old
• Money must used by age 30 (or transferred to a younger sibling)
• You can set-up an account for the education expenses for a beneficiary with special needs (age limitations don’t apply in these circumstances)
• Maximum annual contributions are $2,000 per child from all sources
• You can contribute even if you’ve maxed out contributions to a traditional or Roth IRA

Note: Please consult your tax professional regarding your specific situation.

Contribution limits: Your contribution limit may be reduced. If your modified adjusted gross income (MAGI) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced. If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA.