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Coverdell Education Savings

A Coverdell Education Savings Account lets you choose from a variety of investment options. Plus, your earnings are tax exempt as long as the funds are used to pay for education expenses.


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Eligibility

Anyone whose income meets the following criteria can contribute to a Coverdell Education Savings Account:

  • Adjusted gross income under $110,000 if single
  • Adjusted gross income under $220,000 if married, filing a joint tax return

(Individuals with an adjusted gross income of $95,000 to $110,000, if single, and between $190,000 and $220,000 if married, may make partial contributions.)

Contributions

Contribution guidelines for Coverdell Education Savings Accounts:

  • Maximum of $2,000 per year per child under age 18
  • Contributions may be made past the age of 18 for children who are qualified as special needs beneficiaries

Taxes

Contributions to Coverdell Education Savings Accounts are not tax deductible.

  • Earnings are tax exempt
  • Distributions are tax free if used for qualified expenses

Withdrawals

Funds can be used for qualified education institutions and expenses.

Qualified Withdrawals

  • Tuition
  • Room and board
  • Mandatory fees
  • Books
  • Supplies
  • Uniforms
  • Computer-related equipment

Withdrawal Limits

  • Student must be enrolled full- or part-time at a public, private or religious primary or secondary school
  • Funds must be distributed by the student’s 30th birthday unless the designated beneficiary is qualified as a special needs individual

Options

Investment options include:

  • Money Rate Savings Account
  • 18-Month Variable CD
  • Fixed Rate CD
  • Monthly Saver
  • Stocks, Bonds, Mutual Funds, ETFs and more may be purchased in a Coverdell ESA Brokerage Account

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