10.1.3 Coverdell Education Savings Accounts
Contributions can be tucked away on a tax-favored basis for funding formal education expenses until the individual turns age 18. Single taxpayers whose adjusted gross incomes (AGI) are $95,000 or less are eligible for the maximum contribution ($2,000 a year per child); joint filers are limited to $190,000 AGI. Contributions decrease until the single taxpayer is at $110,000 and joint filers are at $220,000 at which time they are eliminated. In addition, if the funds are not used for their intended purpose, they are taxed as the recipient's income and subject to a 10% penalty. If there are any funds remaining in the account when the beneficiary reaches age 30, remaining funds can be rolled over to another education savings account.
Then of course, there are other expenses to consider which we will discuss in the next lesson.
