How is my contribution treated as far as gift tax is concerned?
Contributions to Coverdell ESAs are considered taxable gifts, but are eligible for the $12,000 (in 2009) per donor gift tax exclusion. If you are simultaneously contributing to a 529 plan for the same child, keep in mind that you must list both contributions when determining your gift tax filings. Tax rulings are still unclear on how the gift tax will apply when one beneficiary rolls their ESA over to the benefit of another beneficiary. Though according to tax law, the gift rules should follow those of the 529 plans. Hence a rollover of the ESA will be considered a gift from one beneficiary to the other, but only if the new beneficiary is at least one generation below the original one.
