Coverdell Savings Accounts
A Coverdell Education Savings Account (ESA) is a savings account created as
an incentive to help parents and students save for education expenses.
The total contributions for the beneficiary (who is under age 18 or is a special
needs beneficiary) of this account in any year cannot be more than $2,000,
no matter how many accounts have been established. The beneficiary will not
owe tax on the distributions if, for a year, the distributions from an account
are not more than a beneficiary’s qualified education expenses at an
eligible education institution. This benefit applies to higher education expenses
as well as to elementary and secondary education expenses.
Generally, any individual (including the beneficiary) can contribute to a Coverdell
ESA if the individual's modified adjusted gross (MAGI) income is less than
an annual, constantly changing maximum. Usually, MAGI for the
purpose of determining your maximum contribution limit is the adjusted gross
income (AGI) shown on your tax return increased by the following exclusion
from your income: foreign earned income of U.S. citizens or residents living
abroad, housing costs of U.S. citizens or residents living abroad, and income
from sources within Puerto Rico or American Samoa. Contributions to a Coverdell
ESA may be made until the due date of the contributor’s return, without
extensions. Please contact us for more about Coverdell Savings
Accounts!