Coverdell Education Savings Account
A Coverdell Education Savings Account can play an important role in helping pay for your child’s qualified elementary, secondary and higher education expenses.1
- Funds can be used for qualified elementary and secondary education expenses as well as college1
- Tax-deferred earnings2
- Tax-free distribution for qualified education expenses
- May change beneficiaries to a qualified member of the same family
- Great flexibility of investment choices
- Starting in 2011, contribution limits will revert to $2,000 per year and funds can be used for qualified elementary and secondary school expenses
- Account owners can only invest cash, not appreciated securities
- Beneficiaries must be under age 18 when contributions are made
- Assets must be distributed by age 30 or earnings are taxed as ordinary income plus a 10% penalty
- Beneficiary takes control of the account at age of majority, 18 or 21 years of age in most states
- Nonqualified withdrawals are subject to ordinary income tax and a 10% federal tax penalty on earnings.
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- Effective permanently due to the American Tax Payer Relief Act of 2012 (ATRA)
- Earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.
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Mutual funds, annuities, and other investment products:
Not FDIC-insured May lose value No bank guarantee
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