Coverdell Education Savings Account

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Coverdell Education Savings Account

An account into which one may deposit funds on a tax-deferred basis, on the assumption that they will be used to pay for the education of the account holder. The funds are invested in a portfolio, much like an IRA or another retirement account. If the funds are in fact used for education, withdrawals from a Coverdell account are tax-exempt up to the total cost of education. Importantly, any tax liability on a Coverdell account is assessed at the account holder's bracket, rather than the contributor's. This protects the account holder from an excessive tax liability in the event a wealthy parent made most or all of the contributions. It was formerly called an education IRA.

Coverdell Education Savings Account

A special individual retirement account opened on behalf of a child under age 18. Contributions of up to $2,000 annually may be made by anyone who meets specified income limits. Contributions are not tax-deductible, but earnings grow tax-deferred until withdrawn. Money withdrawn prior to the child turning age 30 to pay for elementary, secondary, or postsecondary education expenses after high school is not subject to federal income tax. Formerly called Education IRA.

Coverdell Education Savings Account (ESA)

A tax-favored savings plan under which any number of taxpayers may contribute up to a total of $2,000 per year per eligible beneficiary. Contributions are nondeductible. Earnings withdrawals are tax free and penalty free if they do not exceed the amount of qualified education expenses for the year.
References in periodicals archive ?
This rate, which represents a bump of 10 basis points, applies to a number of the credit union's deposit products, including its regular, supplemental and Kidz Klub savings accounts, as well as its IRAs and Coverdell Education Savings accounts.
529 plans, education savings bonds and Coverdell education savings accounts (Coverdell ESAs).
In addition, there is also the lesser used Coverdell Education Savings Accounts and Uniform Gift to Minors Act (UGMA) Custodial Accounts.
Any remaining qualified expenses may then be allocated and claimed against distributions from Coverdell education savings accounts and qualified tuition plans; (48)
The Uniform Gifts to Minors Act (UGMA), The Uniform Transfers to Minors Act (UTMA) Accounts, and Coverdell Education Savings Accounts (formerly known as Education IRAs) are just some of the traditional ways to fund college.
introduced the Student Financial Readiness Act of 2007, which would increase the maximum annual contribution to Coverdell Education Savings Accounts from $2,000 to $5,000 and allow for annual inflation adjustments.
Aimed at attorneys, accountants, financial planners, and insurance advisors, this resource provides comprehensive coverage of all types of IRAs and Coverdell Education Savings Accounts.
Annual contributions to Coverdell Education Savings Accounts (ESAs, formerly called education IRAs) are limited to $2,000 per year per beneficiary.
In addition to the traditional savings techniques discussed above, Congress has recently introduced tax incentives to promote education savings, including prepaid tuition and education investment plans commonly referred to as 529 Plans (after Section 529 of the Internal Revenue Code which governs them), Coverdell Education Savings Accounts (formerly called Education IRAs), Hope Scholarships, and Lifetime Learning Credits.
About a quarter of families use UGMA (Uniform Gift to Minors Act) accounts, a third use savings bonds, a sixth using Coverdell education savings accounts, and a sixth are using section 529 accounts.
Most students will have to borrow some funds for college, but they and their families can reduce that amount through planned, and often tax-deferred, college savings accounts, including 529 plans and Coverdell Education Savings accounts (ESAs, formerly education IRAs).
529 of the Internal Revenue Code and all Coverdell Education Savings Accounts.