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With an Education Savings Account (ESA), you can invest in the future of a child — tax-deferred and federal tax-free for elementary, secondary and higher education expenses.
Coverdell ESA
Account description
Tax-deferred account with earnings and withdrawals which may be free from federal income tax if used for qualified education expenses. Contribution limits apply.
Eligibility restrictions
- Single filer with modified adjusted gross income less than $95,000 (partial contribution between $95,000 and $110,000)
- Married filing jointly with modified adjusted gross income less than $190,000 (partial contribution between $190,000 and $220,000)
Contribution age limits
Beneficiary must be 18 or younger; must be used by beneficiary by age 30
Maximum yearly contribution per student
- $2,000 a year per student until age 18
- Exception for children with special needs
Minimum initial investment
Varies by account from $0 to $100,000
Taxation of earnings and withdrawals
- Earnings may be free from federal income tax if used for qualified expenses before the student turns age 30 (exception for children with special needs)
- Withdrawals may be free from federal income tax if used for qualified expenses
Qualified expenses
Qualified education expenses include tuition, room and board, fees, books, equipment, and supplies at an eligible elementary, high school, and post-secondary school, as well as computer equipment for elementary and high school (restrictions apply).
Penalties for non-qualified withdrawals
- Earnings subject to income tax
- 10% IRS penalty on earnings, with certain exceptions
Ownership of assets
Transactions reported to IRS with student’s tax identification number; depositor (adult) has transaction authority.
The Education Savings Account can remain for the beneficiary of the Education Savings Account until the beneficiary turns 30. Any balance remaining in the Education Savings Account at the time the beneficiary becomes 30 years old must be distributed within 30 days.
Commissions and fees
Annual Custodial Fees and waivers vary by account
