Coverdell Education Savings Account

A flexible, tax-advantaged way to save for your child's education

A Coverdell Education Savings Account (ESA) is our most flexible, tax-advantaged, investment savings account. It offers more investment options than similar savings plans and can also be used for K–12 qualified educational expenses.

Best if you

  • Need an easy way to save for your children's education
  • Are committed to using the funds for education expenses only
  • Want to save for a student with special needs


  • There is no limit on the number of separate accounts that can be set up for a beneficiary
  • Earnings grow tax free
  • Funds can also be used for qualified K–12 expenses

Understand the fine print

It may be helpful to consider some of the contribution and withdrawal requirements when deciding if the Coverdell ESA is right for you.


The basic rules for contributions to a Coverdell ESA are simple.

  • There can be only one beneficiary per account, and the beneficiary must have a Social Security or Tax ID number, and be under the age of 18.
  • The contribution limit is $2,000 per year, per beneficiary.
  • Contributions may be made past the age of 18 for special needs beneficiaries.
  • Anyone can contribute, as long as their adjusted gross income is under $110,000 (if single) or $220,000 (if married, filing jointly).
  • Accounts can be funded by FDIC-insured savings or investments.
  • Contributions are not tax deductible.
  • Students must be enrolled full-time, half-time or part-time in public, private or religious primary or secondary school.


Coverdell ESA distributions must be used to pay qualified education expenses of a designated beneficiary.

  • A beneficiary can take a distribution at any time.
  • Distributions are federal-tax free if used for qualified educational expenses.
  • Funds must be distributed by the beneficiary’s 30th birthday, or they can be rolled over into a new Coverdell ESA for a new beneficiary.
  • Funds can be used for qualified education institutions and expenses, including tuition and fees, room and board, books, supplies, uniforms and computer equipment.
  • Distributions are tax free if they are equal to or less than the amount of adjusted qualified education expenses the beneficiary has in the same tax year.

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Qualified Higher Education Expenses include tuition, all mandatory fees, the costs of required textbooks, supplies and equipment, and certain room and board costs for students who are enrolled at least half time at any accredited school eligible to receive federal financial aid. Non-qualified withdrawals are subject to a federal tax penalty of 10% of earnings and the earnings are taxable as ordinary income.

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.

Penalty may result from early withdrawal.

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