Coverdell Education Savings Account

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