| COVERDELL EDUCATION IRA | |
|---|---|
| Eligibility: | Single filers: MAGI Phase-out between $ 95,000 - $110,000 |
| Joint filers: MAGI Phase-out between $190,000 - $220,000 | |
| Contribution Tax Limit Year 2002 through 2010: |
$2,000 and child must be under age 18 |
| Suitable For: | Parents seeking tax-free growth of savings for children's educational needs |
| Features: | Tax-deferred growth |
| Tax-free distributions for qualified, public or private elementary school, secondary school, or college expenses |
ADVANTAGES:
- Increased annual contribution limit is now $2,000.
- Qualified education expenses may be paid tax-free expanded to include elementary and secondary school expenses.
- Allows parents, grandparents, relatives and friends to make nondeductible contributions of up to $2,000 annually for a child under age 18. Once child is 18, contributions must cease.
- IRA savings must be used by the time the beneficiary is age 30, or it may be rolled over to an Education IRA for another eligible beneficiary in the same family.
- Withdrawals from an Education IRA used to pay for qualified elementary, secondary and higher education expenses are generally tax-free.
- Distributions of income from the account not used for elementary, secondary or higher education expenses are included as income for tax purposes and are subject to the 10% penalty tax.
WHO IS ELIGIBLE TO CONTRIBUTE:
- Single with earned income below $95,000.
- Married couples filing jointly earning less than $190,000 are eligible to make a full contribution.
- Partial contributions can be made to an Education IRA for singles with AGI between $95,000 and $110,000 and joint filers with AGI between $190,000 and $200,000.
