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Saving Made Simple

This section gives you an overview of Coverdell Education Savings Accounts (ESAs). You'll also be able to compare them to other education savings options. Use the link on the right to access our College Savings Calculator.

With each passing year, the cost of financing an education is skyrocketing. That's why it's important to begin planning early for your child's education.

Coverdell ESAs are specifically designed to help fund a child's elementary, secondary and post-secondary education. They can help to pay for qualified education expenses such as tuition, fees, books, and certain room and board costs at eligible educational institutions.

How much can I contribute?

You can contribute up to $2,000 annually to a Coverdell ESA on behalf of a designated beneficiary under the age of 18 (except in the case of a Special Needs Beneficiary, who can receive contributions to their account after they turn 18, and won't be charged with a deemed distribution when they turn 30). Read about distributions below.

A Special Needs Beneficiary is an individual who, because of a physical, mental or emotional condition (including a learning disability), requires additional time to complete his or her education.

You can contribute to both a Coverdell ESA and a 529 College Savings Plan on behalf of the same beneficiary as long as assets are not used to pay for the same qualified expenses.

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Who can contribute?

Contributors must have a modified adjusted gross income (AGI) less than $95,000 (single) and $190,000 (married) to make a full contribution of $2,000. The contribution limit is gradually phased out for individuals with AGIs between $95,000 and $110,000 (single) and $190,000 and $220,000 (joint). Individuals who contribute may designate someone else (the beneficiary's parent or legal guardian) to have authority over the account.

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Tax advantages

The account's earnings accumulate tax free, and distributions to pay for qualified education expenses (such as tuition, fees, books, and certain room and board expenses) are not taxable. Contributions are not tax deductible.

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Contribution deadline

The deadline to make contributions to a Coverdell ESA is your tax-filing deadline (usually April 15), not including extensions.

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Distributions

Assets in the account must be distributed to the designated beneficiary by age 30, or transferred to another Coverdell ESA for the benefit of another eligible family member—except in the case of a Special Needs Beneficiary.

Distributions for qualifying education expenses are tax free. If the distributions are more than the beneficiary's qualified education expenses for the tax year, a portion of the distribution will be taxable to the beneficiary.

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Fees

A $15 maintenance fee will apply, regardless of the number of funds you choose. This fee is automatically deducted from your plan each year, unless you pay it separately by check.

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    For U.S. residents only.