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Coverdell Education Savings Accounts (ESAs)


Parents (and others) may open Coverdell Education Savings Accounts (ESAs) on behalf of beneficiaries who are under age 18 (no age limit in the case of special need beneficiaries). The maximum total contribution to all accounts established for the beneficiary is $2,000 per year. The annual deadline for contributions is the due date for returns for the tax year (i.e., April 15, 2019, for 2018 contributions). Withdrawals may be used for qualifying elementary and secondary expenses, as well as for post-secondary expenses. Qualifying expenses include tuition and fees, books, supplies, and room and board expenses (limited to the college's posted charges or $2,500 for students living off-campus). An account may be rolled over to an immediate family member, and the balance in an account must be fully withdrawn within 30 days of the beneficiary's 30th birthday (no requirement that an account be fully used in the case of special needs beneficiaries).

Tax benefits

No tax deduction is allowed for amounts contributed to accounts. Investment earnings on accounts are exempt from federal and state individual income tax. Withdrawals that are spent on qualifying education expenses are exempt from federal and state individual income tax.

Interaction with other programs

Students (or their parents) may also claim an American Opportunity credit or Lifetime Learning credit and the deduction allowed for interest earned on Education Savings Bonds, but only for qualifying higher education expenses that are not paid for with withdrawals from a Coverdell ESA. Taxpayers may contribute interest earned on Education Savings Bonds to a Coverdell ESA and count the contribution as a qualifying higher education expense in claiming the tax deduction for the interest. Students may pay for expenses not funded with withdrawals from a Coverdell ESA with a student loan, with the interest on the loan allowed as an income tax deduction at the time the loan is repaid. Contributions to a qualified tuition program (QTP) made with amounts withdrawn from a Coverdell ESA count as qualifying education expenses and are exempt from income tax. Taxpayers may contribute to a Coverdell ESA and a QTP in the same year for the same beneficiary.


Any individual may open an account on behalf of a beneficiary, but eligibility to contribute to a Coverdell ESA is subject to an income-based phase-out. The maximum annual contribution amount of $2,000 is phased out for married taxpayers with modified adjusted gross income (AGI) between $190,000 and $220,000, and for single filers and heads of household with modified AGI between $95,000 and $110,000. Taxpayers with modified adjusted gross income above the phase-out may not make contributions to a Coverdell ESA. The limits are not adjusted annually for inflation. Modified adjusted gross income equals adjusted gross income plus foreign earned income, housing costs of individuals living abroad, and income from sources within Puerto Rico and U.S. territories.

March 2019