Save toward a college education.
A Coverdell Education Savings Account is a great opportunity to save toward the costs of elementary, secondary or higher education. Best of all, it's available to everyone: parents, grandparents, other relatives, friends, and even minors (with earned income) can set up an account for any designated beneficiary under age 18.
Here are the specifics:
- You can make non-deductible contributions of up to $2,000 per child each tax year. The accumulation of interest and withdrawals are tax-free as long as the funds are used for qualified, higher education costs.
- If the beneficiary is not going to use the money for education expenses, it must be distributed by age 30. Funds can be transferred from one child's account to another qualified family member.
- Contributions to Traditional or Roth IRAs have no effect on the contributions you can make to each Coverdell Education Savings Account. You can save for a child's education and maximize contributions to your own IRA every tax year.
- The deadline for making a contribution is the tax return deadline for the year for which the contribution is being made, generally April 15th of the following calendar year (not including extension).
*The Coverdell Education Savings Account is formerly known as the Education IRA.