Coverdell Education Savings Accounts

  • Anyone whose income does not exceed the limits (see below) may contribute to an Education Savings Account (ESA).
  • Up to $2,000 total may be invested per year for a beneficiary.  Beneficiaries must be younger than 18.
  • You may divide the maximum allowable contribution, $2000, into ESAs for as many beneficiaries as you wish.
  • You as a contributor do not pay taxes on the earnings, and neither does the beneficiary.
  • Withdrawals for qualified education expenses are tax free and penalty free.
  • Qualified education expenses include, among other things, tuition, fees, books, supplies and equipment required for the enrollment or attendance of a designated beneficiary.
  • Contributions grow tax free and are not tax deductible.
  • Funds may not be moved from Traditional or Roth IRAs into Education Savings Accounts.
  • Your beneficiary must use the funds before he or she reaches age 30, or earnings are taxed and subject to federal premature distribution tax.  This can be avoided by rolling the funds into a Roth IRA or ESA with a different beneficiary.  Rules for special needs children are different.
  • To be able to contribute, your Modified Adjusted Gross Income (MAGI) cannot exceed certain limits.

Single Tax Filers

MAGI* $95,000 or lessMAGI $110,000 or more
Full $2,000 ContributionNo Contribution

Married Joint Filers

MAGI* $190,000 or lessMAGI $220,000 or more
Full $2,000 ContributionNo Contribution

*MAGI:  Modified Adjusted Gross Income

If you fall between the MAGI contribution specifications this year, use the following formula to calculate how much you may contribute to an ESA.

  1. Subtract your MAGI from $220,000:     $200,000 – Your MAGI = X
  2. Divide the total by $30,000:                   X / $30,000 = Y
  3. Multiply the new total by $2,000:           Y x $2,000 = Eligible Contribution Amount

Church Investors Fund does our best to provide you accurate information about investments.  Please remember though, that we are not financial planners or tax advisors.  The information we provide is general in nature and may not apply to your specific situation.  It is always best for you to consult your accountant, financial advisor or tax advisor for guidance tailored to meet your needs.