Start saving money to help a child, grandchild or any young person pay for education expenses.
Coverdell Education Savings Accounts (ESAs) are an ideal way to begin saving money to help a child, grandchild or any young person pay for education expenses.
ESA contributions are not tax-deductible, but they may earn interest tax-deferred until distributed. The child will not owe tax on any distribution from the account if it is equal to or less than the child’s qualified education expenses at an eligible educational institution for the year.
Amounts distributed from an ESA that exceed the child’s qualified education expenses may be subject to income tax and to an additional 10 percent penalty tax. If the child does not need the money for education expenses, the assets may be rolled over or transferred to a qualified family member’s ESA or to a qualified tuition program (QTP).
The maximum contribution limit per child is $2,000 each tax year. The deadline for making a 2016 contribution is April 18, 2017.
|Qualifications||The designated beneficiary must be an individual under the age of 18. The age-18 limitation will not apply to any designated beneficiary with special needs.|
$2,000 per beneficiary.
Note: Contributions do not count against the limits for IRAs.
|Tax Status of Earnings||Earnings grow tax-deferred. Tax-free on withdrawals toward qualified education expenses.|
|Contribution Restrictions||Yes, 2016 & 2017 contributions phase out between $95,000 - $110,000 for single tax filers and $190,000 - $220,000 for joint tax filers.
If income exceeds phase-out limit, contributions are not allowed.
|IRS Penalties for Early Withdrawal||None if:
|Required Distributions||Must be completed 30 days after beneficiary reaches age 30 (except for special needs children) or death.|
|Contribution Age Limit||Not allowed after attaining age 18 except for special needs children.|
IRA / ESA Savings
6-Month IRA / ESA
1-Year IRA / ESA
2-Year IRA / ESA