Ø What are the contribution limits for Education Savings Account?
The contribution limit is $2,000 per year. For 2018, the taxpayer must have an MAGI of less than $110,000 for single filers and $220,000 if filing a joint tax return in order to contribute.
Contributions must meet all the following requirements:
They must be in cash.
They can't be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary.
They must be made by the due date of the contributor's tax return (not including extensions).
Ø When are distributions required from an Education Savings Account?
Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs.
The designated beneficiary reaches age 30. In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. However, this rule doesn't apply if the beneficiary is a special needs beneficiary.
The designated beneficiary dies. In this case, the remaining assets must generally be distributed within 30 days after the date of death.
Ø What are eligible expenses for a Coverdell ESA?
Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. The expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses.
Qualified expenses incurred at a qualified higher education institution (The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school):
Tuition and fees.
Books, supplies, and equipment.
Expenses for special needs services needed by a special needs beneficiary must be incurred in
connection with enrollment or attendance at an eligible educational institution.Expenses for room and board must be incurred by students who are enrolled at least
half-time. The expense for room and board qualifies only to the extent that it is not more than
the greater of the following two amounts:
The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for an academic period and living arrangement of the student.
The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
Note: You will need to contact the eligible educational institution for qualified room and board costs.
The purchase of a computer, computer software, or interest access and related services if it’s to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible post-secondary school.
Qualified Elementary and Secondary Education Expenses (The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school):
Tuition and Fees
Books, supplies, and equipment
Academic tutoring
Special needs services for a special needs beneficiary
Room and Board
Uniforms
Transportation
Computers
A contribution (rollover) to a 529 plan is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary.