When it comes to saving for college, the Coverdell Education Savings Account* (formerly the Education IRA) is an excellent option. 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.
- Tax Advantages
The earnings on your account are tax-free if used for qualified education expenses.
- Tax-Deductible Contributions
Contributions are not tax-deductible.
- Tax Treatment of Withdrawals
You can withdraw contributions and earnings tax-free if they are used for qualified education expenses.
- IRS 10% Additional Tax on Early Withdrawals
You can withdraw contributions and earnings without a tax penalty if the withdrawals are made for qualified education expenses. Otherwise, same as a Traditional IRA.
*Consult your tax advisor.