Education costs continue to rise. The Coverdell Education Savings Account (ESA) allows contributors to invest tax and penalty-free earnings toward higher education costs1.
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!
1 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 Earnings accumulate tax and penalty-free as long as the assets are used to pay qualified education expenses and are withdrawn before the child turns 30.