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
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