Coverdell Education IRA

The purpose of a Coverdell Education Savings Account is to help pay for education expenses, such as tution, fees, books, supplies, equipment, and in some cases, room and board and computers. Coverdell ESAs can be used to pay for qualified elementary and secondary education expenses along with college expenses.

A Maximun of $2000 per year per child can be contributed. Contribution are not tax deductible but earnings grow tax-free if distributions are for qualified education expenses.

Contributions can be made on behalf of the same child to both a Coverdell ESA and a qualified state 529 plan. A person can also receive tax-free distributions from a Coverdell ESA in the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits, but the same expenses cannot be used for more than one of these tax benefits.

If the child decides not to go to college or leaves school before all the funds are withdrawn, the unused funds in the Coverdell ESA can be rolled over into a Coverdell for another child in your family. The funds must be used by the child by the age of 30 , except for a special need child.

 Coverdell ESAs at USSCO are invested in Certificates of Deposit or Education savings accounts.

For more information or to open a Coverdell ESA contact your local USSCO office.