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 Contributions are not tax-deductible, but earnings grow tax-deferred until withdrawn. Money withdrawn prior to the child turning age 30 to pay for elementary, secondary, or postsecondary education expenses after high school is not subject to federal income tax.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 ?
The Tax Relief Act of 2001 increases the annual contribution limit and expands the definition of qualified education expenses for the Coverdell Education Savings Account. Beginning in year 2002, individual taxpayers will now have an opportunity to save for the cost of not only qualified higher education expenses but also qualified elementary and secondary school expenses.--Stacy A.
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.
Joe Knollenberg, R-Mich., 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. The 12th edition incorporates congressional and administrate agency actions, including the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and the Supreme Court's decision in Rousey v.
Annual contributions to Coverdell Education Savings Accounts (ESAs, formerly called education IRAs) are limited to $2,000 per year per beneficiary.
The first group, intended for long-term funding includes two major savings vehicles-qualified tuition programs or QTPs (section 529) and Coverdell Education Savings Accounts or ESAs (section 530) as well as other more traditional provisions such as custodial accounts and education savings bonds.
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).
[section]222.22 to exempt from legal process all qualified tuition programs authorized by ??529 of the Internal Revenue Code and all Coverdell Education Savings Accounts.
Assets in a child's name like a Coverdell Education Savings Accounts (formerly known as an Education IRA) are assessed at a 20% contribution rate.
Refunds can fund several kinds of accounts, including checking, savings, individual development accounts, IRAs (traditional, Roth and SEP), health savings accounts, Archer MSAs, and Coverdell education savings accounts.
The deduction for interest on student loans should save taxpayers about $1 billion a year, while earnings in Coverdell Education Savings Accounts should range between $100 million and $200 million.
Coverdell Education Savings Accounts: Formally referred to as Educational IRAs, these allow users to contribute cumulatively up to $2,000 a year for qualified elementary, secondary school and higher education expenses of a child.