Coverdell ESAs

Coverdell Education Savings Plans

In 2002, the Education IRA was renamed as Coverdell Education Savings Account. These accounts work very much like a 529 plan, offering tax-free investment growth and tax-free withdrawals when the funds are spent on qualified education expenses. However, in addition to college expenses, certain K-12 purchases are also considered qualified when using a Coverdell ESA.

However, tax-free withdrawals from 529 plans are limited to $10,000 in tuition expenses for K-12 schools, but when using a Coverdell ESA, qualified elementary and secondary education expenses also include books, supplies, equipment, academic tutoring, and special needs services in connection with enrollment or attendance at an eligible school.

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