Coverdell ESA (Education Savings Account)
Helping you realize your potential
With tuition soaring and student aid tightening, saving for a child’s education has never been more important. The good news is that PFCU offers a tax-advantaged way to save for education. The Coverdell ESA (formerly Education IRA) is a nondeductible account that features tax-free withdrawals for the specific purpose of a child's higher education expenses from kindergarten through college.
Coverdell ESA Features
- Tax-free earnings
- The ability to invest up to $2,000 per year per child
- Penalty-free withdrawals for elementary, secondary and higher education expenses
- The option to transfer the account if child does not attend an institution of higher education
- The option for almost anyone to make contributions
Coverdell ESA Contribution Requirements
- Make up to the current maximum per year for the designated beneficiary (child)
- Made if beneficiary is under the age of 18 (or beyond for special needs)
- Transferred to IRS defined qualified family members if not used by beneficiary
Coverdell ESA Uses
Contributions and earnings are tax- and penalty-free, if used for qualified education expenses, which include:
- Tuition and fees
- Books and supplies
- Computer equipment to be used for education
- Transportation
- Room and board—only in some cases