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Coverdell Education Savings Account
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Formerly called the education IRA, the Coverdell education savings account is an investment plan used for funding a child’s college education. The maximum amount one may contribute to a Coverdell education savings account changes over time, and there are several rules one must follow to avoid penalties. For example, any funds in the Coverdell education savings account must be distributed to the beneficiary before his/her thirtieth birthday. The Coverdell education savings account is modeled after the traditional individual retirement account, or IRA. Although contributions to a Coverdell education savings account are not tax-deductible, earnings on it are, provided that they be used to pay for qualified education expenses. IRS Publication 970 offers more information on the Coverdell education savings account.
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