ESAs offer a unique way to supplement a child’s future education expenses.
While CESAs don’t offer the ability to save as much money each year, they do offer three unique advantages:
- Savings can be used to pay for expenses in grades K-12, not just college expenses.
- May be used for any educational expense, from tuition and fees to computers and Internet access. If you are planning to send your child to a private K-12 school, this may be a major advantage of the ESA.
- They can be self-directed.
Not everyone will qualify for an ESA. See below to find out if you qualify:
- A maximum of $2,000 per year per beneficiary may be contributed.
- To make the full $2,000 contribution, you must have an Adjusted Gross Income (AGI) of less than $95,000 for single filers and $190,000 for joint filers.
- Ownership of the account remains with the custodians (usually the parents). The beneficiary of the account may be changed at any time.
- Anyone may contribute to a beneficiary’s ESA
- Contributions are not deductible, but earnings grow free from federal taxes. Withdrawals are also free from federal taxes when utilized for qualified education expenses.
Who should consider opening an ESA:
- Young parents that can’t make large contributions their child’s future education.
- Parents that are planning to send their children to a private K-12 school.
- Parents that want to help their children to pay for more than tuition while in college.
- Parents that want more control over how a child’s education savings are invested.
Contact us to learn more about how a self-directed Coverdell ESA can benefit your child’s future education expenses.