Coverdell Education Savings Account - ESA

Coverdell Education Savings Account - ESA

A tax-deferred account created by the U.S. government to assist families in funding educational expenses.

Notes:

Formerly called an education IRA, the ESA provides families with the ability to increase investment earnings through tax-deferral so long as the funds are used for educational purposes. For example, if you contributed $500 to an ESA and it appreciated to $5000 in ten years, the earnings would not be taxed until the owner of the account was enrolled into a post-secondary institution. Furthermore, the gains are taxed at the account holders' rate rather than that of the contributor, which is typically higher.

See also: 529 Plan, Baccalaureate Bond, Income Tax, IRA