A Coverdell Education Savings Account allows you to make an annual non-deductible contribution to a specially designated investment trust account. The account grows federal income tax free and withdrawals are taxfree. Coverdell funds can be used for college expenses as well as K-12 expenses.
Maximum Investment |
$2,000 per year per beneficiary. |
Qualified Expenses |
K-12 and college expenses such as tuition, fees, books, supplies, equipment, limited room and board. |
Account Control |
Responsible Individual on behalf of the beneficiary. |
Tax Advantages |
- Earnings grow federal and state income tax deferred.
- Withdrawals are federal tax-free when used for
qualified expenses.
|
Estate and Gift Tax Advantages |
Contributions qualify for the $13,000 ($26,00 for married couples) gift tax exclusion. |
Income Restriction |
Contributors must have less than $95,000 ($190,000 for married couples) in modified adjusted gross income to qualify for full $2,000 contribution. |
Tax Credit Affected |
Yes. See your tax advisor. |
Withdrawal Penalty |
Earnings on non-qualified withdrawals taxed at owner's rate plus a 10 percent penalty. |