Why consider a Coverdell Education Savings Account?
Coverdell Education Savings Accounts (ESAs) offer the potential for tax-deferred growth and tax-free withdrawals¹. ESAs can help pay for a wide range of qualified expenses. Money can be withdrawn tax-free as early as kindergarten to pay for qualified expenses like books, uniforms and school equipment. Plus, the individual who opens the account maintains direct control over the underlying investments. There is a yearly contribution limit of $2,000, and certain income limitations may apply. The flexibility of an ESA makes it a great choice for many people concerned about the rising costs of education.
What are the main benefits?
- A Coverdell Education Savings Account features a contribution limit of up to $2,000 per child, per year, offering the potential for significant accumulation of funds.
- With a Coverdell Education Savings Account, funds can be used as early as kindergarten for qualified education expenses associated with public, private, religious, elementary and secondary schools. This approach acknowledges that the costs of education can be a burden years before a child sends out his or her first college application. Also, provisions are in place to assist children with special needs.
- To make the accounts more widely available, Coverdell Education Savings Accounts have generous income ceilings. Please see the chart below for income limitations.
|Adjusted Gross Income (AGI)
Married, Filing Jointly
| $95,000 and less
||$190,000 and less
Note: Anyone with an AGI below $95,000 (single)/$190,000 (joint) may make the full $2,000 contribution. The contribution amount then phases down to $0 at the upper AGI limit. For example, a person with an AGI of $98,750 (filing single) would be able to make a $1,500 contribution. These phase out limitations apply only to individual contributors.
Additionally, contributions can be made for a current year up to April 15 of the following year, giving individuals more time to make contributions.
Your Representative can help you decide if a Coverdell Education Savings Account is right for you.
To learn more, read our product brochure about the Coverdell Education Savings Account.