Coverdell Education Savings Account
American Century Investments
The Coverdell Education Savings Account (CESA), formerly known as the
Education IRA, helps you build tax-free earnings to pay for education expenses.
Contributions
- The maximum annual contribution is $2,000 per student.
- Contributions to a CESA are not tax deductible.
- You are not required to have earned income to contribute to a CESA. For
example, a grandparent who is not working may contribute to a grandchild's
account.
- Contributions for students 18 or older are not allowed (except for special
needs students).
- Contributions to a CESA and a 529 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.
- Your contributions may be limited depending on your adjusted gross income
(AGI):
| Allowable Contribution |
Singles |
Couples |
 |
| Full contribution at AGI of: |
$95,000 |
$190,000 |
| Partial contribution phaseout begins: |
$95,001 |
$190,001 |
| No contribution at AGI of: |
$110,000 |
$220,000 |
|
|
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Earnings and Withdrawals
- Earnings grow tax deferred.
- Withdrawals are tax free if used for qualified higher education expenses,
such as room, board and tuition. Withdrawals for qualified elementary and
secondary school expenses also are tax free.
- Withdrawals are required by the student's 30th birthday or taxes and
penalties may apply (except for special needs students).
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Special Considerations
- Funds can be transferred to a CESA of a qualified family member.
- When establishing the account, the account owner can choose whether the
student or the account owner will be able to control the account after the
student reaches the age of majority (18 in most states).
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This information is for educational purposes only and is not intended as
investment or tax advice. Please consult your financial planner or tax advisor
for advice regarding your individual situation.
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