Anyone can set up an ESA at a brokerage or other financial institution, or directly with a mutual fund company. Once an ESA is opened in your child's name, anyone can contribute as long as they follow a few rules: No more than $2,000 per year can be put in a child's ESA(s).
Where Can You Open a Coverdell Education Savings Account? You can open the ESA at a financial institution of your choosing. If a bank or investment institution offers IRAs, it will usually also offer ESAs. Many charge an annual maintenance fee, and some may require a minimum annual contribution.
While your child is the beneficiary of the Coverdell ESA, you are the owner of the account. Although you must use the funds to cover your child's educational expenses, your kiddo does not get control of the fund at any point.
Coverdell ESA withdrawals can be used to pay for qualified education expenses at elementary and secondary schools (K-12), including public, private, or religious schools, as well as any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid ...
Coverdell ESAs allow you to save up to $2,000 per year, per beneficiary. ... You may contribute to both a Coverdell ESA and a 529 plan at the same time, so long as the combined annual contribution is less than the annual gift tax exclusion amount.
The $2,000 maximum is dependent on your filing status and modified adjusted gross income (MAGI). Joint filers with a MAGI of less than $190,000 ($95,000 for single filers) can contribute up to the full amount.
Single filers can contribute to a Coverdell account if their MAGI for the year is less than $110,000. For married couples filing a joint return, the MAGI threshold is $220,000. A trust or corporation can also make contributions to a Coverdell account on behalf of an eligible student.
Roll it over: You can roll over unused Coverdell money to another account for an eligible family member, or you can change the beneficiary for the current account. You can also transfer it to a 529 plan, which is a qualified distribution, to avoid the tax penalty.
As the account holder, you can reimburse yourself for education expenses that you paid from your personal funds. ... Qualified expenses include tuition, books, computers and tech, other school equipment, room and board.
Unlike 529 savings plans, Coverdell ESAs are not state-run. ... To be clear, they get the same tax-advantaged treatment as 529s on the federal level, but your state isn't going to let you write off Coverdell contributions. If you live in a state that offers deductions for 529 contributions, this can be a big difference.
The truth is, Coverdell ESAs do have a negative affect on aid eligibility, but the effect is minimal compared to other accounts. Just like your 529 plan, up to 5.64 percent of the value of a Coverdell ESA owned by a parent or dependent student will be included in the student's Expected Family Contribution (EFC).
What happens to the ESA if a child doesn't use the money? turns 30,* the unused portion can be rolled over to another eligible family member under age 30. If money remains in the ESA when the child turns 30, the ESA will be distributed and taxable to the child.
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