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The National Education Program is open to students between the ages of 5 and 17. Apply by Friday, August 19, 2016.
A Coverdell ESA is the perfect tool for saving money to pay for a child’s educational expenses — from kindergarten through college
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Coverdell Education Savings Accounts let you grow your savings free from federal taxes. You take money out of the account tax-free73, as long as you are spending the money on your child's educational expenses.
You can save up to $2,000 per child, per year in your Coverdell Education Savings Account. You’re allowed to save for your child until they reach age 18.
Keep in mind that there are some restrictions based on your income, and you may be able to contribute for a child beyond 18 years old if they have special needs.
To spend money from your Coverdell ESA tax-free, make sure you use it for qualifying education expenses such as:
Room and board may also be covered in some cases. For more details about what qualifies as an education expense, check out the Coverdell Education Savings Account Rules from the IRS.
Any child under 18 is eligible. Your Coverdell ESA account can be established and funded right up until their 18th birthday. Students with special needs may be eligible for contributions beyond their 18th birthday.
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Alliant Credit Union
Attn: IRA/HSA Dept.
P.O. Box 66945
Chicago, IL 60666-0945
Alliant Credit Union
Attn: IRA/HSA Dept.
11545 W. Touhy Avenue
Chicago, IL 60666
You can save up to $2,000 per child, per year, based on income requirements. Your earnings grow tax free if distributions are used to pay for qualified education expenses.
There are many differences, but one big one is how the funds can be used. Unlike many state-sponsored Section 529 plans, an ESA can be used to pay for qualified elementary and secondary education expenses at most public, private and parochial schools.
As long as income requirements are met, anyone, including grandparents, aunts, uncles and even family friends can open and contribute to a child’s account, up to the annual contribution limit. However, one parent or legal guardian must be listed as the responsible individual on the ESA.
ESAs are flexible and can be transferred from the child into another eligible family member's ESA.
The earnings portion of the amount in excess of the qualified education expense is taxable income to the child. That amount would also be subject to a 10 percent excess ESA distributions tax.
A parent or legal guardian must be the responsible individual (RI) and must be named at the time the ESA is opened. The RI may elect to remain RI after the child attains majority. In most states, that would be age 18.
Contribution limits are reduced for people with modified adjusted gross income (MAGI) between $95K–$110K for single filing status, or $190K–$220K for joint filing status.
Single filers with MAGI over $110K or joint filers over $220K are not eligible to contribute to ESAs.
While a child may have multiple ESA accounts, the annual contribution limit of $2,000 may not be exceeded.
Tax laws state that ESA funds must be used by age 30. Exceptions apply when special needs apply.
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My husband and I have contributed and used funds from the Coverdell ESA for both our sons for educational purposes. It has worked really well for us! We print the form off the website, sign it, and mail it in to have the money withdrawn from the account to their savings account.
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