• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

What is Education Savings Account? Limits & Benefits

What is Education Savings Account? Limits & Benefits

Definition – Education Savings Account

An Education Savings Account is a tax tax-advantaged account allowing the distributions to be solely used for paying qualified education expenses for the designated beneficiary.

It is also known as Coverdell Education Savings Account. This was introduced under the Taxpayer Relief Act of 1997. It was named after the late Senator Paul Coverdell.

The earnings and withdrawals from Education Savings Account (Coverdell ESA) are tax-free if used for qualified educational expenses at a qualified institution. The contributions to ESA aren’t tax-free.

The qualified expenses include the primary school, secondary school, college, and university.

You can open a Coverdell ESA in the United States at any bank or other entity approved by IRS that offer Coverdell ESA.

Coverdell ESA can be opened for any beneficiary under the age of 18 or a special needs beneficiary.

Limits – Education Savings Account (Coverdell ESA)

The maximum limit per year to contribute to one beneficiary in Coverdell ESA is $ 2,000. If having multiple accounts the total should not exceed the given limit.

Contributors can contribute $ 2,000 until the age of 18 and it must be utilized at the age 30. There is an exception for special needs children.

Please note that the contribution made to Coverdell ESA are not deductible.

Who can Contribute to Coverdell ESA?

A single filer who has the modified adjusted gross income less than $ 95,000. If his MAGI is between $ 95,000 and $ 110,000 they will be allowed a partial contribution.

But if the MAGI is above $ 110,000 they cannot contribute to the Coverdell ESA.

For couples filing jointly, their modified adjusted gross income should be less than $ 190,000. MAGI between $ 190,000 and $ 220,000 can contribute partially.

Similar to the above, if MAGI is above $ 220,000 they cannot contribute.

Click the link below to calculate your MAGI:

Modified Adjusted Gross Income Calculator

Benefits of Education Savings Account (Coverdell ESA)

Education Savings Account

Please see IRS Publication 970 for more information on Coverdell ESA.

We have created some useful tax calculators like Simple Tax Estimator, Itemized Deduction Calculator, 401k Calculator etc.

These templates can help you easily calculate your federal income tax. These templates are free to download and easy to use with no limitations.

Disclaimer: Interpretation of the above topic is for education purpose and cannot be considered as a legal advice. It is highly recommendable to consult a CPA or tax consultant before you plan for Coverdell ESA.

We thank our readers for liking, sharing and following us on different social media platforms.

If you have any queries please share in the comment section below. I will be more than happy to assist you.

Filed Under: Tax Glossary

You are Here: Home / Tax Glossary / What is Education Savings Account? Limits & Benefits

About Shabbir Bhimani

I have worked in Excel and like to share functional excel templates at ExcelDataPro.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

ExcelDataPro

Free Excel Pro Templates

  • Glossary
    • Accounting Glossary
    • HR & Payroll Glossary
    • Tax Glossary
  • Templates
    • Accounting
      • Financial Analysis
      • Financial Statement
    • Educational
    • Taxation
      • Federal Income Tax
      • GST
      • UAE VAT
      • UK VAT
    • Human Resources
      • HR & Payroll
      • HR Metrics
    • School Management
    • Social Media
    • Sales-Marketing
    • Personal Finance
    • Other
      • Health & Fitness
  • Functions
  • Calculators
  • Home
  • Contact
  • Privacy
  • Terms

© ExcelDataPro 2025. Content Licensed Under Creative Commons with Attribution Required

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT