Coverdell Education Savings Account (ESA)
Coverdell ESA – An Intelligent Investment
Seeing a child get a good education is every parent’s dream. But you may be wondering how you’ll pay for rising elementary, high school, and college education costs. A Coverdell ESA, formerly known as the Education IRA, may be your answer.
Why a Coverdell Education Savings Account?
A Coverdell ESA allows you to save up to $2,000 per child per year, and earnings grow tax-free if distributions are used for qualified education expenses.* Unlike state-sponsored Section 529 plans, the Coverdell ESA can be used for qualified elementary and high school expenses at most public, private, and parochial schools.
Who can contribute?
Anyone who meets the income requirements can open and contribute to your child’s account. This includes grandparents, aunts, uncles and family friends. The total contributions to all Coverdell ESAs for each child can’t exceed $2,000 per year.
Can I also contribute to other savings plans?
Yes, contributions can be made on behalf of the same child to both a Coverdell ESA and a 529 plan. In addition, your contributions to Traditional or Roth IRAs will not reduce the amount you may contribute to a Coverdell ESA.
*Qualified expenses include tuition, fees, books, supplies, equipment, and in some cases, room and board and computers.
USECU is not at liberty to give tax advice.
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