Education Savings Account

The Education Savings Account (ESA) offers the potential for tax-free investment growth when you use the account to pay for a child's qualified higher education expenses. Investors may contribute up to a total of $2,000 per child per year.

Who Can Invest?

This option is available to you if you have a modified adjusted gross income (MAGI) below $220,000 for joint filers, or below $110,000 if you're single.1 A child under age 18 is named as the beneficiary on the account, with a parent or other responsible individual named to control the account.You can contribute to both Education Savings Accounts and qualified tuition programs (529 plans) in the same year for the same beneficiary.

Contributions to an Education Savings Account may be made up to the tax-filing deadline (not including extensions) and designated for the prior tax year.


  • Tax-Free Growth

    Investments in an Education Savings Account can grow tax-free – a powerful benefit over time.
  • Flexible Contributions

    Any qualifying individual can contribute to an Education Savings Account, making this an ideal vehicle for grandparents or other relatives who wish to give a gift to the child.

Things to Consider

  • It's Not Enough on Its Own

    Even at $2,000 per year, the Education Savings Account alone likely won't pay for your child's education. It's only part of an overall financial plan.
  • Timing

    Contributions can no longer be made once the child reaches age 18. In addition, the account balance must be withdrawn when the beneficiary reaches age 30, subject to taxes and possible penalties.

Eligible Expenses

Withdrawals from an Education Savings Account are free from income taxes as long as they're used to cover eligible education expenses.

  • Tuition, fees, academic tutoring, special needs services, books, supplies, and other equipment incurred with the enrollment or attendance of the beneficiary at a public, private, or religious school providing elementary or secondary education (kindergarten through grade 12), as well as college.
  • Room and board, uniforms, transportation, and supplementary items or services (including extended day programs) required or provided by such a school in connection with enrollment. Students enrolled half-time or more may also make tax-free withdrawals to pay for room and board.
  • The purchase of any computer technology or equipment if the services are to be used by the beneficiary during any of the years the beneficiary is in school.

If the money is used for other purposes, earnings are taxed as ordinary income and may be subject to an additional 10% penalty. If the child named on the account doesn't attend college, the account can be transferred to another member of his or her family to pay for higher education expenses.

  • Not FDIC Insured
  • No Bank Guarantee
  • May Lose Value