This page gives you a brief description of your IRA options. Please use it as a starting point to make yourself familiar with the expanded IRA rules. Then, consult with your tax advisor about what is the best choice for you. Because tax laws are complicated, you'll want to make sure that you take into consideration your complete financial picture and strategy needs. Making an informed decision now can prevent penalties and reduced earnings in the future.
|Type of Account||Coverdell Education Savings Accounts
(formerly called Education IRAs)
|The purpose of this account type is to give you a tax-advantaged way to save for educational purposes. The funds contributed are considered a gift to the designated beneficiary under the age of 18. However this age limit may be waived for people qualifying as "Special Needs" beneficiaries. The funds in these accounts are required to be coordinated with other education plans such as State Tuition Plans or HOPE and Lifetime Learning tax credits.|
|If you are a joint filer with an adjusted gross income (AGI) below $190,000, or if you are a single filer with an AGI below $95,000, you may establish a Coverdell Education Savings Account for designated beneficiaries and are eligible for the full contribution amount.
The Coverdell Education Savings Account must be designated as such when you open the account.
|Your maximum contribution amount for the tax year 2017 is $2000, per beneficiary per year. Generally the beneficiary will be a child. The maximum allowable contribution is based on AGI as discussed above. The contributions are not deducted from taxable income.|
|The funds in the account are treated as a gift to your beneficiary, and therefore, may only be withdrawn by the beneficiary for qualified higher education expenses. Any funds that are not used by your beneficiary may be rolled over into another Coverdell Education Savings Account for another beneficiary. By the time your beneficiary turns 30 years old, all funds must have be withdrawn. This age limit may be waived for those qualifying as "Special Needs" beneficiaries. Any funds not used by the beneficiary for qualified education expenses and not rolled into another Coverdell Education Savings Account will be distributed to the beneficiary and subject to normal income taxes and a 10% penalty.|
|Eligibility for Other IRAs|
|Contributions that you make to one or more Coverdell Education Savings Account does not exclude you from making an individual contribution up to the maximum allowed for Traditional or Roth IRAs for retirement savings if you are qualified.|