Coverdell ESA - Education Savings | Personal Banking CT | Ion Bank

Education costs continue to rise. The Coverdell Education Savings Account (ESA) allows contributors to invest tax and penalty-free earnings toward higher education costs1.

mother with daughter adding to piggy bank

Paying for private school and college can be expensive.

Start saving when your child is young!

Covering College Expenses

A savings account dedicated to private school and college costs can make it easier for families to pay out-of-pocket. A type of trust or custodial account, the Coverdell ESA is solely used to pay for qualified education expenses for the designated beneficiary.

Setting up a Coverdell ESA

This account is a tax-advantaged strategy to help save for a child’s future.

To get started:

  • You can file singly or jointly to open the account
  • You may set up a Coverdell ESA for multiple children under 18
  • Maximum yearly contribution cannot exceed $2,000 of tax and penalty-free earnings

Anyone can make contributions to the ESA, whether it be grandparents, aunts and uncles or friends, so a child can receive financial support beyond what his or her parents can invest.

Aside from contributions for a Traditional IRA, Roth IRA or employer-sponsored retirement plan, full contributions may be made to the account.

If the funds are not used by the time a student is 30, withdrawals may be taxed or come with fees and penalties.

To open a Coverdell Education Savings Account, contact Ion Bank today!

Qualified Coverdell Education Savings Account distributions are not subject to state and local taxation in most states. Earnings accumulate tax and penalty-free as long as the assets are used to pay qualified education expenses and are withdrawn before the child turns 30.