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Coverdell Education Savings Accounts

A Coverdell education savings account (ESA) is a tax-deferred account with earnings and withdrawals free from federal income tax if used for qualified education expenses. Investors may contribute up to $2,000 per year per child.


ESAs are available to parents or guardians of minor children within the following income ranges:*

  • Single tax filers: Modified adjusted gross income (MAGI) less than $110,000
  • Joint tax filers: MAGI less than $220,000


  • Growth of earnings and withdrawals for qualified expenses are free of federal taxes.
  • The adult owns the assets and controls the account; a child under age 18 is named as the beneficiary on the account.
  • Qualified expenses are broad and include tuition, room and board, computer technology, fees, books, equipment, and supplies.
  • Applicable school levels include eligible elementary, high school, and postsecondary school.

Things to consider

  • Contributions must be made prior to the beneficiary turning 18 and the account balance must be withdrawn by the time the beneficiary reaches age 30 to avoid taxes and penalties. Exceptions apply for special needs beneficiaries.
  • Earnings for nonqualified withdrawals will be taxable and subject to a 10% penalty (with certain exceptions).
  • If the beneficiary decides not to go to college or doesn't need the funds for school, the account can be transferred to another member of their family.

*Contributions are gradually reduced for single investors with MAGI between $95,000 and $110,000 or for joint filers between $190,000 and $220,000.


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