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It’s important to ensure your children can afford the education they need to reach their goals. With Coverdell Education Savings Accounts (ESA), you choose how your funds are invested and have flexibility to change benficiaries.

Overview

Yearly Contribution Limit

$2,000 per child

Income Limits

Yes

Federal Tax on Withdrawals

None

Penalties for Non-Qualified Withdrawals

10% additional federal tax on taxable distributions

Deadline for Tax Year Contributions

April 15 of next year

Qualified Expenses

K-12 (includes supplies & special ed.) and college

Features

  • Qualified K-12 education expenses include books, supplies, equipment, academic tutoring and special needs services connected to attendance at an eligible school.
  • You may change the beneficiary of the account to pay for education expenses or another child.

Details

  • If your modified adjusted gross income is less than $110,000 ($220,000 for joint returns), you may be able to establish a Coverdell ESA to finance qualified education expenses for a designated beneficiary. When you establish the account, the beneficiary must be under age 18 or be a special needs beneficiary.1
  • Any number of accounts can be opened for one beneficiary, but if the annual deposits across those accounts exceed $2000, a penalty will be owed.
  • For financial aid purposes, the beneficiary is considered the account owner, so impact to financial aid is minimized.
  • Contributions must be made in cash.
  • Beneficiary becomes owner once they reach legal age.
  • You can contribute to both a 529 plan and an ESA for the same beneficiary.

Disclosures

KIS does not give tax or legal advice. The comments regarding tax treatment in this material simply reflects our understanding of current interpretations of tax laws as they apply to the products covered in this material. Since tax laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as they apply to your particular situation.

Investment products offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor.

Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA). KIS and KIA are affiliated with KeyBank National Association (KeyBank).

Check the background of this firm on FINRA's BrokerCheck.

Investment and insurance products made available through KIS and KIA are:

NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL OR STATE GOVERNMENT AGENCY.

KIS, KIA and KeyBank are separate entities, and when you buy or sell securities and insurance products you are doing business with KIS and/or KIA, and not KeyBank.

1

Check current tax year information on IRS.gov.

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