Coverdell ESA

The Coverdell education savings account (formerly known as the the Education IRA) was created in 1998 exclusively for the purpose of paying for "qualified higher education expenses" for an "eligible" student.

General Information

  • Annual contributions are nondeductible and limited to $2,000 and can only be made until the account holder or designated beneficiary reaches age 18.
  • The ability to contribute to a Coverdell ESA is phased-out for joint filers with Adjusted Gross Income (AGI) between $190,000 to $200,000 for married couples, while $95,000 and $110,000 for single AGI.
  • Qualified expenses can be used for elementary and secondary education.
  • Contribution deadline is the contributor's tax filing deadline of April 15.

Product Features

  • Tax Advantage-Contributions are not taxed as they accumulate and distributions used to pay for qualified education expenses for eligible students are generally not subject to federal income tax.
  • Termination Rule-Any balance remaining in the Coverdell education savings account must be distributed when the beneficiary or account holder attains age 30 or dies.
  • Flexibility-Dollars can be invested in a variety of products depending upon the investment objectives of the account owner.
  • Penalty for Withdrawal-Distributions that exceed qualified higher education expenses would be subject to a 10% penalty unless due to death, disability or scholarship.

The employees of Warren Wealth Management do not provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

Investment Types

For Individuals:

529 Plans
Coverdell ESA
Life Insurance
Roth IRA
Traditional IRA

For Businesses:

401(k) Plans
403(b) Plans
457(b) Plans
Money Purchase Plans
Profit Sharing