Any distributions of Coverdell funds that aren't used for qualified education expenses are subject to a 10% penalty and the investment gains are taxable. Once the beneficiary of the Coverdell ESA turns 30, the funds must be distributed. There are exceptions to this age restriction for special needs beneficiaries. The beneficiary of a Coverdell account must be under 18 years old, and you are only allowed to contribute to a Coverdell ESA until the beneficiary turns 18. If your MAGI is higher, the contribution limit is reduced and once your MAGI hits $110,000 for single filers ($220,000 married filing jointly) you are unable to contribute to a Coverdell ESA. And you can contribute the maximum if your modified adjusted gross income (MAGI) is under $95,000 for single filers and $190,000 a year for married filing jointly. The maximum annual contribution limit is $2,000 per year. Qualified expenses include things such as tuition, books and supplies for college or K-12 schooling. You can deposit after-tax dollars into a Coverdell ESA and withdraw the investment gains tax-free, as long as the funds are used for qualified education expenses. Investing +More All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs BondsĬoverdell education savings accounts are tax-advantaged custodial accounts that can be set up to help pay for the beneficiary's education expenses. Help for Low Credit Scores +More All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score Taxes +More All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds Small Business +More All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business Personal Finance +More All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief Best Mortgages for Average Credit Score.
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