Coverdell Educational Savings Account
Give your child the gift of education.
Seeing a child work toward a college degree is a parent’s dream. A Coverdell Educational Savings Account (ESA) can help parents sleep at night. These ESAs were created to help you pay for your child’s education expenses, such as tuition, fees, books, supplies, equipment and, in some cases, room and board and computers. These options were improved by the Economic Growth and Tax Relief Reconciliation Act of 2001.
Contributions to a Coverdell ESA are never tax-deductible. However, a Coverdell ESA offers you the potential for tax-free withdrawals—including earnings.
The total contributions each year to a child’s Coverdell ESA cannot exceed $2,000. If you’re eligible, you may contribute the full amount for each child. For example, if you have three children and each has his or her own Coverdell ESA, you may contribute $6,000 ($2,000 to each ESA).
The primary benefits of a Coverdell ESA include:
- Unlike state 529 plans, Coverdell ESAs can be used to pay for qualified elementary and secondary education expenses including college.
- Earnings grow on a tax-deferred basis, and distributions are tax-free if the money is used to pay qualified education expenses.
- For more information on Coverdell ESAs and the opportunity to determine if this might be a good option for your family, please contact our IRA Coordinator, Nicole Hopkins at nhopkins@telcommcu.com or call 417.886.5355.
