Formally known as the “education IRA,” Coverdell Education Accounts (ESA) are ideal if you want to save for educational expenses for a child or grandchild. They were designed to encourage savings to cover future education expenses (elementary, secondary and/or college), such as tuition, books, uniforms, etc. Contributions can be made to an ESA until December 31st of the tax year. Parents, grandparents, other relatives, friends, and even minors (with earned income) can set up an account for a designated beneficiary, as long as the beneficiary is under the age of 18. Nondeductible contributions can be made of up to $2,000 per beneficiary each tax year. The accumulation of interest and withdrawals are tax-free as long as the funds are used for financing education expenses.
• Maximum annual contribution of $2000 per child until age 18
• Contributions are not tax-deductible
• Withdrawals for certain qualified education expenses may be tax-free*
• Qualified education expenses including tuition, room and board, fees, books, equipment, and supplies at an eligible elementary, high school, and post-secondary school, as well as computer equipment for elementary and high school (restrictions apply).
• Income limits may apply
• 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.
For more information or to open your account(s), stop by one of our three conveniently-located branches in Wilkes-Barre, Hazleton or Plains Township.
*Consult a tax advisor for information.