Formerly known as the education IRA, the now named Coverdell ESA can be used to secure funds for college or university for your children. If you are a parent or guardian for a child or children under the age of 18 you are allowed to make nondeductible contributions to an education IRA. The money in this IRA may be taken out, free of tax whenever you need it for educational purposes.
When the education IRA account was renamed to the Coverdell ESA, many things were also changed for the better, no there are more options and you can get more from this account for your child. Here are some of the changes made:
- With an increase in the amount that you can contribute now up to $2000 whereas the education Ira only allowed for a maximum of $500.
- You now also have additional time to put the money in.
- You are now able to pay for more types of education expenses with the money you received from this account.
- You can now combine Coverdell cash with other education tax cuts, making it even easier on your pocket and bank account.
- You can now add money to plan all the way up until the tax filing cut-off date in April.
- You now have the ability to make contributions for a child 18 years or older if they have special needs.
- Not only parents can put money into the fund, grandparents, godparents, aunts, uncles and friends can contribute also just ensure that the amount does not exceed $2000 as you will be charged a 6% annual fee in the event that that happens.
- They have put higher income limits in place for contributors. So you can contribute if you make a maximum of $95,000 or even up to $110, 000 if you are single and $190,000 to $220, 000 if married and filing jointly. For persons who earn above this you are not allowed to contribute.
- The money you receive can now be used for not only educational expenses but also precollege expenses such as room and board, computers and books.
- You can now make contributions to the education Ira as well as a state college tuition program at the same time.
There are many benefits to the new and improved education Ira, with some of the most appreciated ones being; the ability to make contributions to other education programs and that the money can be used to cover other college related expenses. There are many other benefits mentioned in this article too. If you would like to ensure that your child or the child of a loved one has a secure educational future then you can contribute to such a program. You don’t have to be their parent to contribute as anyone can do it. Just bear in mind that the total contributions cannot exceed $2000 so you should ascertain if anyone else is making contributions so you don’t have to pay the excess annual fee.