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Learn More About Coverdell Education Savings Plans (CESAs)
Eligibility
Your eligibility to contribute to a Coverdell Education Saving Plan (CESA) depends on your modified adjusted gross income. To be able to make a full contribution:
- Individuals must have a modified adjusted gross income of less than $95,000.
- Couples who file jointly must have an income of less than $190,000.
- You do not need to earn any income in order to contribute nor do you need to be related to the account’s beneficiary.
Contributions
If eligible, you may contribute:
- Up to $2000 a year for each child under 18.
- An exception to the age limitation can be made for special needs children. These are defined as persons requiring more time to complete their education due to a physical, mental or emotional condition or learning disability.
Tax Savings
Your contributions to a Coverdell Education Saving Plans (CESAs) are not tax-deductible. However, the money you contribute will accumulate and grow tax-free as long as it is used to pay qualified education expenses.
Distributions:
Before you contribute to a Coverdell Education Saving Plan (CESA), here are a few things you need to know about “distributions”, the money you or your child will eventually withdraw from the account:
- Distributions are tax-free if used for qualified education expenses. These include: tuition, fees, academic tutoring, special needs services, books, supplies, equipment, uniforms, transportation, education computer technology or equipment (including Internet access) and (for a student enrolled at least on a half-time basis or more) room and board.
- Besides college, qualified education expenses also apply to elementary and secondary schools, whether public, private or religious.
- Distributions are tax-free and penalty-free if used by the beneficiary for qualified education expenses before reaching the age of 30.
- If NOT distributed prior to the beneficiary's 30th birthday, the balance must be distributed to the beneficiary with the earnings taxable and subject to a 10% IRS penalty.
Still have questions? We can help.
- E-mail us.
- Call us at 877.672.2265.
(8:30 a.m. until 7:00 p.m. CST, Monday through Friday, 9:00 am until 5:00 pm CST, Saturdays, & 10:00 am until 3:00pm CST, Sundays, excluding bank holidays)
- Stop by your neighborhood branch.
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