Coverdell Education Savings Accounts

Families can invest up to $2,000 in after-tax money per child per year in Coverdell Education Savings Accounts, formerly known as Education IRAs. Earnings grow tax-free and money withdrawn is tax-free as long as it is used for qualified education expenses. The money can be used to pay for college tuition, books and supplies and even some elementary, middle, and high school expenses.

Eligibility

You can establish or contribute to a Coverdell Education Savings Account if your modified adjusted gross income (AGI) is less than $110,000 if you file an individual return or less than $220,000 if you file a joint return. The amount you can contribute is gradually reduced if your AGI is between $95,000 and $110,000 (individual tax return) or more than $190,000 but less than $220,000 (joint tax return).

Limit

Total contributions to all Education Savings Accounts per year cannot exceed $2,000 per child. You may contribute to an Education Savings Account and a Section 529 plan in the same year for the same child.

How to Set Up an Account

Contact a mutual fund company, brokerage firm, or bank to set up an account.

For more information, contact:
U.S. Internal Revenue Service (I.R.S.)
Phone: 1.800.829.3676

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