COVERDELL ESA

COVERDELL EDUCATION SAVINGS ACCOUNT

Make an annual non-tax deductible contribution to a Coverdell Education Savings Account (ESA) and the earnings grow tax-free.

 

How it works: Open an account for any beneficiary under the age of 18 for as little as $5.  Contribute up to $2,000 per year, per account.  The earnings on your contributions grow tax-free at a fixed rate of .50% APY.  When it comes time to use the funds, the beneficiary can do so without paying any additional taxes (the beneficiary must use the funds before turning 30).

 

Who can contribute: The account can be opened by a parent or guardian, and contributions can come from parents, grandparents, relatives, friends or family members. Contributor adjusted gross income must be under the limit set for a given tax year to be eligible – talk to us for details on the current year’s limits.

 

Other details: Contributions must be made before the beneficiary turns 18. You can also rollover any unused ESA funds, without penalty, to other family members under the age of 30.

 

*As with any investment that will affect your taxes, and to find out if you are eligible to contribute, consult your tax advisor.

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