Coverdell Education Savings Account
Tax-free growth for K-12 and higher education expenses
What is a Coverdell ESA?
A Coverdell Education Savings Account (ESA) is a tax-advantaged investment account designed to help families save for educational expenses.
Unlike 529 plans, Coverdell ESAs can be used for K-12 expenses as well as college costs, and offer more investment flexibility including alternative assets.
Key Benefits
K-12 Expenses
Use funds for elementary and secondary school expenses, not just college costs.
Tax-Free Growth
Earnings grow tax-free when used for qualified education expenses.
Investment Flexibility
Unlike 529 plans, invest in alternative assets like real estate and private equity.
Transferable
Change beneficiaries to another family member if needed.
Technology Expenses
Pay for computers, software, and internet access for educational purposes.
Multiple Contributors
Family members and friends can contribute to a child's education.
Qualified Education Expenses
K-12 Expenses
- Tuition and fees
- Books and supplies
- Computer equipment and software
- Internet access
- Academic tutoring
- Special needs services
- Uniforms (if required)
- Extended day program costs
College Expenses
- Tuition and fees
- Books, supplies, and equipment
- Room and board (if at least half-time)
- Computer and internet access
- Special needs services
- Required fees and equipment
Contribution Rules
Annual Limit
$2,000
Maximum per beneficiary per year from all contributors combined
Age Limit
Age 18
Contributions must stop when beneficiary turns 18 (exceptions for special needs)
Distribution Age
Age 30
Funds must be used by age 30 or transferred to another family member
Income Limits
Phase-out
MAGI $95K-$110K single, $190K-$220K joint
Coverdell ESA vs 529 Plan
| Feature | Coverdell ESA | 529 Plan |
|---|---|---|
| Annual Contribution Limit | $2,000 per beneficiary | High (varies by state) |
| K-12 Expenses | Limited ($10K/yr) | |
| Investment Options | Any (including alternatives) | Limited menu |
| Age Restrictions | Must use by age 30 | No age limit |
| Income Limits | ||
| Self-Directed |
Invest in Your Child's Education
Open a Coverdell ESA today and start building their educational future