Education savings account

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Related to Education savings account: 529 College Savings Plan

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.

Education savings account (ESA).

You can put up to $2,000 a year into a Coverdell education savings account (ESA) that you establish in the name of a minor child. The assets in the account can be invested any way you choose.

There is no limit to the number of accounts you can set up for different beneficiaries, but no more than a total of $2,000 can be contributed in a single beneficiary's name in any one year. If you choose, you may switch the beneficiary of an ESA to another member of the same extended family.

Your contribution is not tax deductible. But any earnings that accumulate in the account can be withdrawn tax free if they're used to pay qualified educational expenses for the beneficiary until he or she reaches age 30. The costs can be incurred at any level, from elementary school through a graduate degree, or at a qualified post-secondary technical or vocational school.

There are no restrictions on using ESA money in the same year the student uses other tax-free savings, or the student, parent, or guardian uses tax credits for educational expenses. But you can't take a credit for expenses you covered with tax-free withdrawals.

To qualify to make a full $2,000 contribution to an ESA, your modified adjusted gross income (MAGI) must be $95,000 or less, and your right to make any contribution at all is phased out if your MAGI is $110,000 if you're a single taxpayer. The comparable range if you're married and file a joint return is $190,000, phased out at $220,000.

References in periodicals archive ?
In addition, higher education savings account contributions are part of a state's savings account, often managed by a mutual fund company on behalf of the beneficiary; thus, risk of loss is low.
Under the proposal, the government would set up education savings accounts for these parents and send them the money earmarked for them in the public school system.
Jose Rodriguez, D-El Paso, unsuccessfully proposed an amendment to the school finance bill that simply crossed out the education savings account language.
42) Practically every student in Nevada is eligible for an education savings account if they choose to have it.
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Arizona's education savings account system for K-12 students
Start a college fund for your kids; whether it is an Education Savings Account or a 539 plan, there is no better time than the present to get going.
The Coverdell Education Savings Account (ESA) program and the Qualified Tuition Program (QTP/529) are similar in many ways.
Contributors with modified AGI above this phase-out range are not allowed to make contributions to an Education Savings Account.
For example, if the assets held in an Education Savings Account (ESA) are not used for educational purposes, any distributions become fully taxable and subject to a 10% penalty.
they provide recommendations on standards and assessments for "high performance" schools, but also discuss such proposals as education savings account and literacy programs for the adult workforce.
You can set aside educational funds for children or grandchildren, such as a 529 Plan or Coverdell Education Savings Account, or assist with the payment of their health expenses.

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