Coverdell Education Savings Account (CESA)

A Coverdell Education Savings Account is a tax-free educational savings account established for the benefit of a child under the age of 18.

Qualifications:

There are no age requirements for the contributor to open a CESA for a minor.
The contributor does not have to have earned income.
If the contributor does have earned income, phaseout levels have been established by the IRS.

Contributions:

Individuals may make a nondeductible contribution of a maximum amount of $2000 annually per child as long as the accountholder does not fall into the phase out levels.
This contribution does not reduce the accountholder’s annual contribution limit to an IRA for himself or herself.
Contributions to a CESA are not subject to gift tax and the earnings will accumulate tax-free.

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