Routing # 321076470

Coverdell Education Savings Account

Take advantage of tax-deferred savings for all things education.1


What is a Coverdell Education Savings Account (previously known as Education IRA)?

With an Education Savings Account (ESA), you can invest in the future of a child — tax-deferred and federal tax-free for elementary, secondary and higher education expenses.

It was created as a tax-deferred trust account by the U.S. government to assist families in funding educational expenses for beneficiaries who must be 18 years old or younger when the account is established. The age restriction may be waived for special needs beneficiaries. While more than one ESA can be set up for a single beneficiary, the total maximum contribution per year for any single beneficiary is $2,000. The student must disburse funds by age 30.

Reap the benefits

Tax savings

Tax-deferred funds for child’s education

Investment options

Choose from savings, money market, or certificates

Contribution limit

Up to $2,000 annually

Save for education

Can cover school expenses from K- college

Tax-free withdrawals

If you use the money for a qualified purpose, it’s tax-free

Tax-free earnings

Interest earned is tax-free1

College Savings Calculator

How much should I be saving for college?

How much should I be saving for college?

With college costs increasing at twice the rate of inflation, it is important to start saving early. Interest working for you now in a regular savings program is much better than having interest work against you in the future in the form of education loans. Use our college savings calculator to determine how much you should be saving for college on a regular basis.

Current Savings and Assumptions

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NameCurrent Age
(0 to 30)
College Start Age
(0 to 30)
Years Attending
(0 to 20)
Annual Cost

Assumptions

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This information may help you analyze your financial needs. It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. The calculations do not infer that the company assumes any fiduciary duties. The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy. Hypothetical illustrations may provide historical or current performance information. Past performance does not guarantee nor indicate future results.

Calculations provided are for demonstration purposes only and do not guarantee credit approval for the rate and terms displayed.

Frequently Asked Questions

  • The trust or custodian is the party that establishes and controls the funds in the ESA for the student beneficiary, who must be under the age of 18 at the time of designation. Funds within the account are not considered to be owned by the custodian nor the beneficiary unless they are the same individual.

    Qualified education expenses include college expenses and certain elementary and secondary school expenses including:

    • Tuition
    • Fees
    • Books
    • Supplies
    • Equipment
    • Academic tutoring
    • Special needs services
    • Room and board expenses
    • Uniforms
    • Transportation
    • Educational computer technology or equipment
    • Internet access

    The deadline to contribute to a Coverdell Education Savings Account (ESA) for a particular tax year is generally April 15 (or tax day) of the following year. When this date occurs on a weekend or a legal holiday, the following business day becomes the deadline. Tax return extensions will not affect this deadline.
     
    When you contribute to your IRA between January 1 and April 15 (or tax day) for the previous tax year, it’s referred to as a “carryback” or “prior year” contribution.

    Unlike a 529 plan, the sum in an education IRA must be distributed to a child if not used for college. ESA treatment in federal financial aid is like that of 529 plans—as an asset of the parent (custodian). A withdrawal is not reported as income if it is tax-free at the federal tax level.

    Designated beneficiaries with special needs:

    • Will be eligible to receive annual contributions after attaining age 18
    • Will not have his or her Education Savings Account balance distributed within 30 days after attaining age 30
    • Will be eligible to receive rollover contributions from qualified family members after attaining age 30
    • Will be eligible to be named as a designated beneficiary to a qualified family member’s Education Savings Account after attaining age 30

1 Consult your tax advisor about Coverdell Education Savings Account (ESA) advantages.

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