Coverdell Education Savings Account

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?

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