A Coverdell education savings account (ESA) allows you to make nondeductible contributions on behalf of a child each year until the child reaches age 18*. The earnings generated on the ESA contributions remain tax-deferred while held in the ESA. Then when a child uses ESA assets to pay for qualified education expenses, the contributions and the earnings are distributed tax-free.
Qualified Education Expenses:
Elementary, Secondary, or Post-Secondary
- Tuition and Fees
- Supplies and equipment
- Room and board
- Special needs services
Anyone – family members or nonfamily member can contribute to a child’s ESA, as long as his modified adjusted gross income falls below or within the income limits for the year. Those who are eligible to contribute may give to more than one ESA on behalf of multiple children, not to exceed the annual contribution limit of $2,000 (or less depending on MAGI) per child. Likewise, any one child may not receive more than $2,000 total per year in ESA contributions.
IMPORTANT! – Tax rules can be complicated. This information is intended to serve as a general overview. Before making any decisions, you should speak with a qualified tax advisor.