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A Coverdell Education Savings Account, or Coverdell ESA, is a savings account that can be set up to pay for qualifying educational expenses of a designated beneficiary. A Coverdell ESA can be established for anyone under the age of 18, or anyone that is designated a special needs beneficiary.
Contributions to a Coverdell Education Savings Account are not tax deductible, and the earnings are allowed to grow tax-free until distributed. Distributions from a Coverdell are tax-free as long as they do not exceed the beneficiary's adjusted qualified educational expenses. Generally, contributions can be made to a Coverdell as long as the taxpayer's Adjusted Gross Income, or AGI, is less than $110,000 for individual filers, or $220,000 for those filing joint returns.
In 2011 and 2012, the contribution limits for a Coverdell ESA are $2,000 per beneficiary. |
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