How does a Coverdell Educational Savings Account work?
The Coverdell ESA works much like a Roth IRA, and at one point was called the Education IRA. Contributions are non-deductible and grow tax free. Withdrawals are also tax free for qualified higher education expenses. ESA Contribution and income limits. Contributions to Coverdell ESAs are limited at $2,000 per year from all sources (limit drops to $500 in 2010 if Congress does not extend the current contribution limits). To make the maximum contribution, contributors must have an AGI lower than $95,000 for single filers and $190,000 for joint filers. Contribution limits are phased out for AGI levels between $95,000 – $110,000 for single filers and $190,000 – $220,000 for joint filers. To avoid the income limits and make the full contributions, you can gift the money to the minor and they can contribute it to their Coverdell ESA. Coverdell ESA eligibility. The beneficiary of the Coverdell ESA must be younger than 18 at the time the contribution is made and the assets must be used or trans
