Coverdell education savings accounts
Accounts for children under 18
Formerly called the Education IRA, a Coverdell education savings account (ESA) is a convenient saving/investment option for anyone who wants to build funds to help cover educational expenses.
How does an ESA work?
You may contribute up to $2,000 per year to an ESA for each beneficiary child's or grandchild's elementary, secondary and college education expenses including private school tuition, tutoring and computers.
- Parents can contribute to the ESA until the day before the child's 18th birthday.
- The child must use the funds before age 30 unless he or she fits the federal government's "special needs" parameters.
- Contributions are not tax deductible, but earnings are federal income tax-free when used for qualified education expenses.
- Investment options typically include a broad range of securities and other choices.
- For financial aid purposes, an ESA is considered the parents' asset if the parents own the account.
- Eligibility phases out for joint filers with incomes between $190,000 and $220,000, and for single filers with incomes between $95,000 and $110,000.
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