Coverdell Education Savings Account

Use to pay a student’s eligible k-12 expenses, as well as post-secondary expenses.

Tax Features
  • income limits apply to contributors
  • cannot be more than $2,000 in any year, no matter how many accounts have been established
  • beneficiary is someone who is under age 18 or is a special needs beneficiary
  • contribution not deductible
  • amounts deposited in the account grow tax free until distributed
  • distributions are tax-free as long as they are used for qualified education expenses

  •  no tax on distributions if they are for enrollment or attendance at an eligible educational institution
  • Education tax credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits
  • If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax.

For more information, see Tax Tip 2008-59, Coverdell Education Savings Accounts.

Content from and Citation to IRS