Coverdell Education Savings Account

A Coverdell Education Savings Account (ESA) is a tax-favored account that helps pay for qualifying college and K-12 education expenses. Earnings on contributions may be tax-free and qualifying withdrawals are tax- and penalty-free.¹ 

Why open a Coverdell ESA?

  • Tax-favored growth and distributions
    Get tax-free growth on earnings and tax- and penalty-free withdrawals when used for qualifying expenses.¹
  • Easy account transfers
    Assets can be rolled from one ESA to another and beneficiaries can be changed as needed. 
  • Can be used for both K-12 and higher education expenses
    Unlike 529 plans, ESAs can be used to pay for K-12 education expenses including tuition, tutoring, uniforms, computers, even transportation.
  • Anyone can contribute
    As long as they meet the income limits, anyone can contribute to your ESA.
  • No annual maintenance fees
  • Available as a Savings or Certificate account
    See current ESA rates and balance minimums
     

ESA Eligibility 

Use the chart below to see if you’re eligible.

 ESA Eligibility Eligible
Not Eligible
Is the designated beneficiary under age 18?
Unless beneficiary is special needs, no contributions can be made after age 18. Funds must be used by age 30.
Yes No
Is the responsible individual on the account a parent or legal guardian of the designated beneficiary? Yes No
 Ready to open? Make sure you have the following available:
• SSN for beneficiary(s)
• State-licensed ID
open education savings account online  

 
Annual Contribution Limits

  • Maximum Annual Contribution – $2,000
    Total contributions to an ESA cannot exceed $2,000 a year. 
     

Learn More

IRS.gov – Coverdell Education Savings Account

 


A Prime Savings account is required to open a Coverdell ESA at Sound. It is the responsibility of the beneficiary and responsible party to track contributions made to the account. Individual contribution qualifications and limits are based on the depositor’s income level. If opening account for special needs member over age 18, please contact the credit union.

1For specific tax advice, please consult your tax advisor.

Routing #: 325183220

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