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Home > Preparing for College > Saving for College > Descriptions of Education Savings Options > Coverdell Education Savings Account


Coverdell Education Savings Account


A Coverdell Education Savings Account (ESA), formerly called an Education IRA, is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the designated beneficiary of the account. You can open a Coverdell ESA at financial service firms and institutions.

Tax Benefit

Earning on a Coverdell ESA grow tax-free until withdrawn to pay for qualified expenses.

Income Limits

If your modified adjusted gross income is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell Education Savings account to finance the qualified education expenses of a designated beneficiary.

Designated Beneficiary

The designated beneficiary is the individual named in the document that creates the trust or custodial account who will receive the benefit of the funds in the account.

Qualified Expenses

Qualified higher education expenses are expenses required for the enrollment or attendance of the beneficiary at an eligible educational institution and include tuition and fees, the cost of books, supplies and equipment, the amounts contributed to a qualified tuition program and, if the student is enrolled at least half-time, the cost of room and board. You can also use withdrawals from a Coverdell ESA for certain elementary and secondary education expenses.

Eligible Educational Institutions

Eligible educational institutions are any college, university, vocational school or other postsecondary educational institution eligible to participate in student aid programs administered by the United States Department of Education and elementary and secondary education institutions.

Total Contributions Limit

There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. However, total contributions for the beneficiary cannot be more than $2,000 no matter how many accounts have been established.

Age Limit

No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special-needs beneficiary. Amounts in a Coverdell ESA must be withdrawn when the designated beneficiary reaches age 30.


Certain transfers to members of the same family are permitted.

Compatibility with Other Tax Benefits for Higher Education

You can claim the American Opportunity or Lifetime Learning Tax Credit in the same year you take a tax-free distribution from a Coverdell ESA, provided that the distribution from the Coverdell ESA is not used for the same expenses for which the credit is claimed. You can make contributions to a Coverdell ESA and Qualified Tuition Program (QTP) in the same year for the same beneficiary.

For additional information on Coverdell ESAs, see Internal Revenue Service Publication 970.


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