Education Savings Account support

Formerly known as an Education IRA, a Coverdell Education Savings Account is a tax advantaged investment account for future education expenses (elementary, secondary, or college). Consult a tax professional for more information.

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

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.
For 2021, the deadline to contribute a carryback contribution is tax day, April 18, 2022.

The annual per-designated-beneficiary contribution limit is $2,000.

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

Almost anyone can contribute. There is one key limitation:

• Each child can receive a total of the maximum allowed per year in contributions from all sources. It does not make a difference if this is done in a single account or multiple accounts designed to benefit the same child.

Contributors don’t have to be family members. Corporations and other entities (including tax-exempt organizations) can also make contributions to Coverdell ESAs, regardless of the income of the corporation or entity during the year of the contribution.
With this broad range of potential contributors, it’s possible that more than one person may want to contribute for the same child. A coordinated effort should be encouraged to avoid excess contributions.

You can roll over funds from one Coverdell Education Savings Account (ESA) to a new or existing ESA. The funds, however, must benefit the same child or an eligible member of the child’s family. A rollover contribution doesn’t affect the annual contribution limit. Rollovers must be completed within 60 days of the initial distribution and are limited to one per 12-month period.

You can change the designated beneficiary. For example, if the current beneficiary has finished school and there are funds remaining, a sibling can become the beneficiary. New beneficiaries must be an eligible family member:

• Children, grandchildren, and stepchildren
• Brothers, sisters, stepbrothers, and stepsisters
• Nephews and nieces
• Parents, stepparents, and grandparents
• Uncles and aunts
• Spouses of all the family members listed above

Even with this extended range of family members, contributions only can be made for those younger than 18 years old.