A Smart Way to Save for Your Child's Education!
The Coverdell ESA, also known as the Educational IRA, is a type of tax-advantage savings account created by the Taxpayer Relief Act of 1997. This IRA’s sole purpose is to help you pay for your child’s education expenses such as: tuition, fees, books, supplies, equipment, and in some cases room and board and computers.
Who Can Contribute
- A single filer with a Modified Adjusted Gross Income (MAGI) up to $95,000
- A joint filer with MAGI up to $190,000
- Up to $2000 per year until the child (Designate Beneficiary) reaches the age of 18. (Does not apply to special needs beneficiaries)
- Tax free withdrawals including earnings for qualified expenses.
There are no penalties for withdrawing money from your Coverdell ESA for the following reasons:
- Tuition, fees, books, and equipment required for enrollment or attendance at nearly any post secondary educational institution
What if the child does not use all of the money saved in the ESA?
- A Designated Beneficiary can be changed if that child does not use all of the money in the Coverdell ESA. (spouse, sibling, step-sibling, niece, nephew, first cousin, etc as long as they are under the age of 30)
- Cannot be rolled over into an Traditional/Roth IRA
Education IRA investment options
- IRA savings account with automatic payroll deduction or direct deposit contributions.
- Certificates of Deposit offering a variety of maturities.
- Click here for current IRA CD and IRA savings account rates.
- Use our financial calculators to estimate your saving potential.
The National Credit Union Administration insures IRAs to $250,000. This insurance protection is in addition to the insurance provided on your other deposits at MHS.
To speak with one of our friendly Member Service Representatives about opening an Education IRA call 248-334-0568, email us or stop in today!
This information is not intended as tax advice; please consult a tax professional.