Coverdell Education Savings Account
Coverdell Education Savings Account Contributions
- The maximum annual Coverdell Education Savings Account contribution is $2,000 per student.
- Contributions to a Coverdell Education Savings Account are not tax deductible.
- You are not required to have earned income to contribute to a Coverdell Education Savings Account. For example, a grandparent who is not working may contribute to a grandchild's account.
- Coverdell Education Savings Account contributions for students 18 or older are not allowed (except for special needs students).
- Contributions to a Coverdell Education Savings Account and a 529 Savings Plan are allowed in the same year for the same student.
- Contributions may be made until the original due date of your tax return, normally April 15 of the next year.
- Reduced annual contribution limits to Coverdell Education Savings Accounts may apply depending on your Modified Adjusted Gross Income (MAGI)1:
|Allowable Contribution for 2016||Singles||Married Filing Jointly|
|Full contribution at MAGI1 of:||$95,000||$190,000|
|Partial contribution phaseout begins:||$95,001||$190,001|
|No contribution at MAGI1 of:||$110,000||$220,000|
Coverdell Education Savings Account Earnings & Withdrawals
- Earnings grow tax deferred.
- Withdrawals from the Coverdell Education Savings Account are tax free if used for qualified higher education expenses, such as room, board and tuition.2
- Withdrawals for qualified elementary and secondary school expenses are tax free.2
- Withdrawals are required by the student's 30th birthday or taxes and penalties may apply (except for special needs students).2
- Withdrawals are not available online. You can submit your withdrawal request by phone, fax or mail.
CESA Special Considerations
- Special Option When Establishing a CESA Account*:
The depositor3 can choose to prohibit the responsible individual4 from changing the designated beneficiary5 to another member of the designated beneficiary's family, as described in section 529(e)(2) of the Internal Revenue Code and the Options for Removing Money section in the CESA Disclosure Statement and Custodial Agreement .
1Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) with standard deductions included.
2State and local taxes may apply.
3Depositor: The person who establishes the Custodial Account and may designate himself or herself as the Responsible Individual if the Depositor is a parent or guardian of the Designated Beneficiary.
4Designated Beneficiary: The child on whose behalf the CESA has been established.
5Responsible Individual: The individual who is authorized to act on the account and must be a parent or guardian of the Designated Beneficiary. The Designated Beneficiary will become the Responsible Individual upon reaching the age of majority.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.