Untitled Document


Education Savings Account

Current Rates


Formally known as Education IRA, Coverdell Education Savings Account (ESA) is a savings option to start a fund for your children's education. Contributions are made yearly with a $2,000 limit. Eligibility to open and contribute the full amount to a Coverdell ESA requires a single filer with modified adjusted gross income up to $95,000 or a joint filer with a modified adjusted gross income up to $190,000. Contributions to the Coverdell ESA can be made until the child reaches the age of 18. This age limit does not apply to special needs beneficiaries.

However, anyone who meets the income requirements can open and contribute to your beneficiary's Coverdell ESA. This includes grandparents, aunts, and uncles, family, friends and anyone else who wants to help in your child's education fund. Every Coverdell ESA must have one responsible individual (parent or legal guardian) to oversee the account. This adult or responsible individual can only withdraw funds for qualified education expenses or the amount withdrawn will be taxed. Funds must be withdrawn before he or she reaches age 30 (special needs does not apply to the age limit or 30).

Qualified expenses included tuition, fees, books, equipment required for enrollment or attendance. Certain room and board expenses also may qualify. Qualified expenses also include the same expenses for elementary and secondary education, and the purchase of computer technology or equipment that is used by the beneficiary. Withdrawals for the beneficiary are tax-free and penalty-free only for qualified education expenses.