Pines 1

IRAs (Traditional, Roth and Coverdell Education Savings Accounts)

Education IRAs (Coverdell Education Savings Accounts)

  • Purpose is to pay a child’s education expenses.
  • Earnings are tax-free if used for qualified education expenses. *
  • Qualified expenses can be for public, private or parochial elementary, secondary or post-secondary expenses.
  • Qualified expenses may include tuition, fees, books, supplies and equipment, computer technology or equipment.
  • Room and board may qualify if certain conditions are met.
  • Non-qualified distributions may be subject to tax and penalty.*
  • The Designated Beneficiary (child) must be under age 18 for regular contributions, unless the child is a special needs student.
  • Responsible Individual must be the child’s parent or legal guardian.
  • Persons other than parents may make contributions, though certain income restrictions apply.
  • Companies, including tax-exempt organizations, are allowed to contribute to an Education Savings Account.
  • Contributions are not tax-deductible.*
  • Total contributions may not exceed $2,000 per child per year (2011).
  • Coverdell ESAs are flexible and can be moved to a qualifying family member if not used by the original Designated Beneficiary.
  • Funds must be used or transferred to the ESA of a qualifying family member by the 30th birthday of the original Designated Beneficiary.

Fees could reduce the earnings on the account.

*Consult with a qualified professional for tax advice.

Back to IRAs.