What is a Coverdell education savings account?
A Coverdell education savings account (ESA) is a tax-advantaged investment account designed to help families save for educational expenses. Contributors can make up to $2,000 in after-tax annual contributions per beneficiary, with earnings growing tax-free when used for qualified education expenses. Unlike 529 plans, Coverdell ESAs cover both K-12 and higher education costs, including tuition, books, supplies, technology, and room and board. The account offers broad investment options similar to IRAs, allowing for sophisticated growth strategies that can be coordinated with Child traditional IRA contributions and Tax loss harvesting strategies. Beneficiaries must be under 18 when the account is established, and unused funds must be distributed by age 30 unless transferred to eligible family members. Income limits apply to contributors, phasing out between $95,000-$110,000 for single filers and $190,000-$220,000 for married couples filing jointly.
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