Coverdell Education Savings (formerly Education IRA)

For parents or grandparents, starting a Coverdell Education Savings early can really help pay for your child's or grandchild's education. Annual, non-deductible contributions of up to $2,000 a year per child may be made to this type of account. The earnings on your contributions are free from federal tax as long as they are used to pay for the child's education expenses.

Key Features

Distributions from Coverdell Education Savings are free from federal income tax if used to pay for a child's qualified education expenses (i.e., tuition, fees, books, supplies, equipment, and room and board). If funds are not used for one child, they may be rolled over to another child.

If funds are not distributed prior to the child turning age 30, earnings are subject to federal income tax and IRS penalties.

How Much You Can Contribute

Each year, non-deductible contributions of $2,000 may be made per child under age 18. Contributions are limited by child to the $2,000 maximum per year regardless of the number of contributors. Contributions to Coverdell Education Savings can be made in addition to those made to a Traditional or Roth IRA.

Important note:   The IRA features described are for informational purposes only and are subject to change. Advice from a tax advisor or legal counsel is recommended. To open an IRA account, please visit your local branch.