Terms of Use

What is a Coverdell ESA?

Formerly called Education IRAs, a Coverdell Education Savings Account (ESA) is a type of IRA that allows you to make nondeductible contributions up to $2,000 annually for anyone under the age of 18 or a special needs beneficiary of any age.  Assets in a Coverdell ESA must be used for qualified education expenses before your child (the designated beneficiary) turns 30 in order to be withdrawn tax-free.

Coverdell accounts offer individuals a simple savings mechanism for future education expenses.  While $2,000 a year may not sound like much, it adds up.  Consider this:  if you begin saving $2,000 a year for a child starting at birth and you earn just 6% on the account, you'll have over $60,000 by the time the child turns 18. 

With a Coverdell ESA: 

  • The maximum contribution amount for a beneficiary is $2,000 per year
  • Qualified education expenses include K–12 school expenses, as well as those for higher education
  • Beneficiaries can also claim education tax credits without penalty; however, expenses paid for with Coverdell funds can't be used to claim credits
  • Age limitations are waived for special needs beneficiaries
  • Contributions on behalf of the same beneficiary can be made to both a 529 and Coverdell ESA without penalty

Qualified Education Expenses

Qualified education expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses, including tuition, fees, books, supplies and equipment as well as room and board (allowable if the designated beneficiary is at least a half-time student at an eligible educational institution).

Tax-free Earnings 

Contributions to a Coverdell ESA are not tax-deductible; however, all earnings accumulate on a tax-deferred basis and can be withdrawn tax-free if used for qualified education expenses.

Who's Eligible

Anyone can contribute up to $2,000 per child under the age of 18 for a Coverdell ESA as long as his or her income does not exceed the limits. 

In 2021, the income limit for making a maximum contribution is $190,000 for married couples filing joint tax returns, and contributions phase out at $220,000.  For those not filing a joint return, the contribution limit is $110,000. 

You have until the due date of your tax return (not counting extensions) to contribute to a Coverdell ESA. 


Distributions are tax-free if used to pay for qualified education expenses. Funds must be spent or paid to the beneficiary within 30 days of their 30th birthday. Any withdrawals not used for qualified education expenses are subject to both income taxes and a 10% IRS penalty.