Coverdell Education Savings Accounts

What is a Coverdell?

We understand that saving for a child's education can be a challenge, especially when trying to balance it with your normal day-to-day expenses and long-term goals like retirement. In 1998, the Coverdell Education Savings Account was created to help parents pay for children's education at any level—from kindergarten through high school and beyond. And here at Edward Jones, we can help you learn more about your options and put together a real strategy—your time frame, how much you want to save and what investments make sense for you.

How it works

  • Anyone under age 30 can be the beneficiary of a Coverdell.
  • Contributions aren't tax deductible, and they are limited to $2,000 total per year, per child, until the child reaches age 18.
  • You may be eligible for a full contribution ($2,000), a reduced contribution or no contribution at all, depending on your modified adjusted gross income (MAGI) for the year.

MAGI Coverdell contribution limits

How You File Your Taxes 2015 MAGI Contribution
Individual Less than $95,000 Full
$95,000–$110,000 Reduced*
$110,000 or more None
Married Filing Jointly Less than $190,000 Full
$190,000–$220,000 Reduced*
$220,000 or more None

*If you qualify for a reduced contribution, your local financial advisor can help you calculate your limit.

Withdrawals from Coverdells are generally tax- and penalty-free, as long as they are used for "qualified" education expenses—meaning expenses for any elementary, secondary or postsecondary school. Virtually all public, nonprofit and privately owned for—profit schools are eligible.

But if withdrawals are used for nonqualified educational expenses, they are subject to ordinary income tax plus a 10% penalty on the earnings. Any balance remaining in the Coverdell must be distributed or transferred to another eligible family member when the beneficiary reaches age 30.


Coverdell contributions aren't tax deductible, but withdrawals aren't subject to federal income taxes as long as they are "qualified higher education expenses" like tuition and fees.

Financial aid

College savings plans can impact a student's eligibility for financial aid. Regardless of whether the Coverdell is owned by either the student or the parent, it's considered a parental asset, which generally has little impact on financial aid.

How we can help

Your financial advisor can help you learn more about your options and put together a strategy.

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