A Coverdell Education Savings Account allows you to make an annual non-deductible contribution to a specially designated investment trust account. The account grows federal income tax free and withdrawals are taxfree. Coverdell funds can be used for college expenses as well as K-12 expenses.
||$2,000 per year per beneficiary.
||K-12 and college expenses such as tuition, fees, books, supplies, equipment, limited room and board.
||Responsible Individual on behalf of the beneficiary.
- Earnings grow federal and state income tax deferred.
- Withdrawals are federal tax-free when used for
|Estate and Gift Tax Advantages
||Contributions qualify for the $13,000 ($26,00 for married couples) gift tax exclusion.
||Contributors must have less than $95,000 ($190,000 for married couples) in modified adjusted gross income to qualify for full $2,000 contribution.
|Tax Credit Affected
||Yes. See your tax advisor.
||Earnings on non-qualified withdrawals taxed at owner's rate plus a 10 percent penalty.