Coverdell Education Savings Account

With a Coverdell Education Savings Account (Coverdell ESA), your savings grow, free from federal taxes.¹ You can take money out of the account tax-free, as long as you are spending the money on your child's educational expenses.

Save up to $2,000 per child, per year in your Coverdell Education Savings Account.
Any child under 18 is eligible and the account can be funded right up until their 18th birthday. Students with special needs may be eligible for contributions beyond their 18th birthday.²
Your contribution grows tax-free and withdrawals are not taxed as long as you use the funds for your child’s educational expenses. Funds are not tax-deductible though.
Your accounts are safe and secure—insured by the National Credit Union Share Insurance Fund to at least $250,000. Visit mycreditunion.gov to learn more about your Share Insurance Coverage and to access resources including a Share Insurance Estimator tool, publications, videos, and more.

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Qualifying Education Expenses

To spend money from your Coverdell ESA tax-free, make sure you use it for qualifying education expenses such as:

Tuition and fees
Uniforms, books, and supplies
Extended day program costs
Academic tutoring equipment
Computer equipment and internet access that is used for school
Transportation
Select room and board expenses
Other special needs expenses

Coverdell Education Savings Account Rate

APY

0.02%

Dividend Rate

0.02%

Minimum to open

View all rates and disclosures

Contribution Requirements

Who can contribute? Anyone with modified adjusted gross incomes (MAGI) under $110,00 for single taxpayers and $220,000 for joint taxpayers. That “anyone” includes grandparents, aunts, uncles, and even family members as long at the above income requirements are met. A parent or legal guardian must be listed as the responsible individual on the account regardless of who contributes.
How long can contributions be made? Contributions can be made until a child reaches 18 (except for children with special needs).
What is the maximum annual contribution allowed per child? Total contributions can’t be more than $2,000 in any year, no matter how many accounts have been established.

Distribution Requirements

When are distributions allowed? Distributions can be made without penalty when the funds are used for a child’s higher education expenses prior to age 30 (except for children with special needs). Any balance remaining in the account at the time the beneficiary becomes 30 years old must be distributed within 30 days.
Do Coverdell ESAs have any specific withdrawal requirements? There are no specific withdrawal requirements other than the funds must be used for higher education expenses prior to age 30 (except for children with special needs). Any balance remaining in the account at the time the beneficiary becomes 30 years old must be distributed within 30 days.
Are funds transferable if a child does not attend college or need the funds for education expenses? Funds can be transferred from one child to another child’s Coverdell ESA.

How is a Coverdell ESA different than a 529 plan?

There are many differences, but one big one is how the funds can be used. Unlike many state-sponsored Section 529 plans, a Coverdell ESA can be used to pay for qualified elementary and secondary education expenses at most public, private, and parochial schools.

Useful Resources

To learn more about Coverdell Education Savings Accounts, please refer to the IRS guidelines for these accounts.

IRS Guidelines

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¹Tax laws are subject to change. Contact a tax professional for more details.
²Funds must be used by beneficiary by age 30 (except for special needs).

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