Coverdell Education Savings Accounts (ESAs) are available to help save for a child's education. ESAs qualify for special tax advantages, including tax deferred earnings, and can be used for qualified expenses associated with elementary, secondary or higher education.*
Amounts deposited in the account grow tax-free until distributed, and the child will not owe tax on any withdrawal from the account if education expenses for the year are equal to or exceed the amount of the withdrawal. The Credit Union's annual fee for the Coverdell ESA is $9.00. The one time set up fee is $3.00 per ESA. Deposits can be made through payroll deduction or in person.*
Those who are eligible may contribute up to $2,000 annually on behalf of beneficiaries. The beneficiary must be a child under the age of 18 unless the beneficiary has 'special needs,' as defined in IRS regulations. The entire account must be distributed before the beneficiary's 30th birthday, with exception of those beneficiaries with 'special needs.' Funds not used for qualified education expenses by the time the beneficiary reaches age 30 will be subject to a 10% penalty, and taxation.*
*Please consult with a tax advisor for questions and information regarding taxes and to determine if you would benefit from tax savings. The information above is for informational purposes only and should not be construed as tax advice.