When it comes to saving for college, the Coverdell Education Savings Account is an excellent option that may be opened with any IRA account. This unique plan is an ideal way for parents, grandparents, other relatives or organizations to substantially contribute to the education of a child.
Up to $2,000 in total contributions per year are allowed for any child under the age of 18. Interest on the CESA account grows tax-free from federal and most state taxes, and balances may be transferred from one child to another within a family. At withdrawal, funds must be used for qualified education costs such as tuition, fees, books, supplies, transportation, and room and board. So give your child a head start in life with a Coverdell Education Savings Account!
Eligibility Requirements and Account Features
Anyone within the income limits may contribute for a designated beneficiary under the age of 18.
The earnings on your account are tax-free if used for qualified education expenses.
Contributions are not tax-deductible.
IRS 10% Additional Tax on Early Withdrawals
Withdrawals that are made for expenses other than qualified education expenses are subject to the IRS 10% additional tax, the same as a Traditional IRA.
1. Consult your tax advisor.