What
is a Coverdell Education Savings Account (CESA)?
A Coverdell Education
Savings Account (CESA) is a great way to save for the future cost
of a child's education expenses. Contributions can be made until
the beneficiary reaches the age of 18 and after tax contributions
and earnings can be withdrawn tax free to pay for qualified education
expenses.
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Who can contribute to a CESA?
A contribution
can be made by anyone on behalf of a beneficiary under the age of
18 as long as:
- the total
maximum contributions made for a single beneficiary is not more
than the annual maximum
The contributors
modified adjusted gross income (MAGI) is limited as follows:
| Contribution
Restrictions |
| Filing
Status |
MAGI |
Contribution |
| Single
and Married filing separately |
less
than $95,000 |
full contribution |
| Single
and Married filing separately |
$95,000-$110,000 |
contribution
phased out |
| Single
and Married filing separately |
>$110,001 |
no contribution |
| Married
filing jointly |
less
than $190,000 |
full contribution |
| Married
filing jointly |
$190,000-$220,000 |
contribution
phased out |
| Married
filing jointly |
>$220,001 |
no contribution |
Remember, if your
MAGI disqualifies you from a contribution for your child, anyone
who qualifies can make a contribution on their behalf.
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How
much can I contribute?
For 2004 and after
the annual contribution limit per beneficiary is $2000.00
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Are
contributions tax deductible?
No. But earnings
are tax free.
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Can
I change the beneficiary on a CESA?
You can change the beneficiary on a CESA only if the new beneficiary
is an eligible family member. Eligible family members include:
- children, grandchildren,
stepchildren
- siblings and step-siblings
- nieces and nephews
- parents, stepparents
and grandparents
- uncles and aunts
- spouses of all family
members listed above
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What is the contribution
deadline ?
The deadline for
contributions is the tax filing deadline for that year (April 15th).
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What
is a qualified education expense?
Qualified education
expenses include:
- tuition, fees, books, supplies and equipment, academic tutoring,
room and board, transportation, special needs, uniforms, internet
access, educational computer, technology or equipment
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Is
there a deadline for withdrawals?
Distributions must be completed 30 days after the beneficiary reaches
age 30.
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