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A plan for any page of their storybook

Whether you're planning for elementary school expenses for your little ones or college costs when they're older, a Coverdell can help your child live happily ever after.


Intro to Coverdell Education Savings Accounts

A Coverdell ESA is an education savings plan designed to help save for the elementary, high school and college costs of a child.

A Coverdell ESA can be a good choice if you have younger children and want the flexibility to use the money for a wide variety of education costs. Coverdell accounts are funded with after-tax contributions, and the maximum contribution per account is $2,000 per year. In general, contributions can be made to the account until the child reaches age 18. We’ll help you understand the details to see if this is a good choice for your family’s situation.

Who It’s For

A Coverdell ESA can be a good choice if $2,000 is the most you think you’ll save each year per child. And it gives you the flexibility to use the money as early as elementary school. If you don’t want to be limited to $2,000 a year though, or want the option to use the money for more than just education expenses, you have other college savings plan options too.

We can help educate you on your education funding options to see what plan is best for you.

How It Works

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Who Can Contribute

Almost anyone can contribute to a Coverdell ESA – parents, grandparents, friends, corporations and tax-exempt organizations.

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How Much You Can Contribute

The maximum contribution to a Coverdell account is $2,000 per year. So if you contribute $1,500, additional annual contributions for that child can be no more than $500 from other people. You can make contributions to the Coverdell ESAs of as many children as you like.

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How Long You Can Contribute

Contributions can be made to the account until the child reaches age 18. The age limit is extended for individuals who require extra time to complete their high school education because of a learning disability or a physical, mental, or emotional condition.

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School Selection

The money in a Coverdell account can be used at any elementary (kindergarten through grade 8), secondary (grades 9-12), and accredited public, private or religious colleges.

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Investment choices vary depending on the plan, but you’ll generally get a pretty wide range of options. We’ll help you look through your choices.

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Ownership and Control

The account owner controls the account for the benefit of the child. The money then generally becomes the child's property at age 18.

Income Limits

If your modified adjusted gross income (MAGI) falls within the limits below, you can contribute to a Coverdell:

Joint Filers All other Filers* Contribution Limits
MAGIs under $190,000 MAGIs under $95,000 Full contribution allowed
$190,000 to $220,000 $95,000 to $110,000 Phase-out ranges
MAGIs at or above $220,000 MAGIs at or above $110,000 No contribution allowed

*Corporations and other entities (including tax-exempt organizations) can contribute regardless of income of the entity during the year.

Tax Considerations

Taxes on Contributions

All contributions are made after taxes, but contributions do qualify for the annual federal gift tax exclusion (in 2014, $14,000 for single filers and $28,000 for joint filers).

Earnings and Withdrawals

Earnings grow federal income-tax deferred. You won’t pay taxes for withdrawals either, as long as they’re used to pay for qualified education expenses (see below). State tax laws may vary.

Qualified Education Expenses

Qualified education expenses include: tuition, books, education equipment (including computers)*, fees, supplies, educational technology (including internet access & related services)*, academic tutoring*, uniforms*, supplementary items, room and board, transportation*

*Elementary and secondary school expenses only.

IRA Considerations

Contributions to a Coverdell ESA are not considered in calculating contributions to IRAs. Therefore, even if you make the maximum allowable contribution to your IRA, you may still make a contribution to a Coverdell if you meet the income requirements. 

Using Money for Unqualified Education Expenses

The child has until 30 days after reaching age 30 to use the money for qualified education expenses, unless he/she is a special needs child (someone who requires additional time to complete his/her education because of a learning disability or physical, mental, or emotional condition). You can also choose to transfer the account to another family member. 

Withdrawals of earnings not used for qualified educational purposes may be subject to a 10% penalty. Those withdrawals will be included in the child’s taxable income.

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The information contained herein is general and should not be considered legal or tax advice. Laws of particular state and your particular situation may significantly affect the general information presented herein. The availability of the tax or other benefits mentioned above may be conditioned on meeting certain requirements. COUNTRY Financial and our representatives cannot give tax or legal advice. You should consult your attorney or tax advisor regarding your specific legal or tax situation.

Registered Broker/Dealer offering securities products and services: COUNTRY® Capital Management Company, 1705 N. Towanda Ave, PO Box 2222, Bloomington, IL 61702-2222. tel (866) 551-0060. Member FINRA/SIPC