| Who may contribute? | Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following Modified Adjusted Gross Income (MAGI): - Single filer: Up to $114,000
- Joint filer: Up to $166,000
- Reduced contributions allowed for higher incomes. (Consult your tax advisor.)
| Anyone under age 70 1/2 who has income from compensation (or who is filing jointly with a spouse who earns compensation). | Anyone who has a Modified Adjusted Gross Income (MAGI): - Single filer: Up to $95,000
- Phase-Out Range (contribution limit below $2,000) Single filer: $95,000 to $110,000
- Joint income filer: Up to $190,000
- Phase-Out Range (contribution limit below $2,000) Joint income filer: $190,000 to $220,000
- Married, filing separately: up to $95,000
- Phase-Out Range (contribution limit below $2,000) Married, filing separately: $95,000 to $110,000
- People with incomes exceeding the above limits ($95,000 - $117,000) may be able to make smaller annual contributions.
- Contributions are not allowed after beneficiary reaches age 18 (except for 2002 and later years, contributions after age 18 are allowed for special needs beneficiaries).
- You can now make contributions to both Coverdell Education Savings accounts and state tuition programs.
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| What is the maximum contribution? | - $5,000 for years 2008 and beyond
Higher contributions are allowed for those 50 or older. Contribution limits may be reduced by contributions to traditional IRAs.
- $6,000 for 2008
- After 2008, the $6,000 limit will increase for inflation in increments of $500.
| - $5,000 for years 2008 and beyond
Higher contributions are allowed for those 50 or older.
Contribution limits may be reduced by contributions to Roth IRAs. | Limits apply to all Education IRAs, now known as Coverdell Education Savings Accounts. |
| Who can make deductible contributions? | No one. Contributions to Roth IRAs are non-deductible. | Contributions are fully deductible for: - Single individuals not active in employer retirement plans (regardless of income)
- Single individuals active in employer retirement plans with MAGI of $52,000 or less
- Married couples with neither spouse active in an employer retirement plan (regardless of income)
- Married individuals active in an employer retirement plan with joint tax returns showing MAGI of $60,000 or less
- Married individuals not active in an employer retirement plan with spouses who are, as long as MAGI is $150,000
- Individuals with income levels that exceed the above limits may be able to deduct a portion of their contributions (Consult your tax advisor.)
| No one can deduct contributions to Coverdell Education Savings Accounts. |
| What are the tax advantages? | - Regular contributions can be withdrawn at any time, tax-free and penalty-free.
- After the account has been open for 5 tax years, earnings may be withdrawn tax-free and penalty-free for any of these reasons: age 59 1/2, disability, death, or first-time home purchase.
| - Earnings grow tax-deferred until withdrawn.
- Contributions may be tax-deductible.
| - Withdrawals for qualified education expenses are tax-free.
- Special needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age.
- Qualified education expenses may include tuition, fees, books, and computer equipment required for elementary, secondary, and post-secondary education.
- A beneficiary may receive tax-free distributions from an Education IRA in the same year he/she claims the Lifetime Learning or HOPE Scholarship tax credits.
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| When can I withdraw funds without penalty?? | - Earnings are tax-free if account has been open for 5 tax years and fundsare withdrawn for a qualified reason (age 59 1/2, disability, death, first-time home purchase
- You are not required to start making withdrawals at age 70 1/2.
| Withdraw funds penalty-free for any of the following reasons: - Qualfied higher education expenses
- First-time home purchase
- Age 59 1/2
- Disability
- Qualifying medical expenses exceeding 7.5% of adjusted gross income
- Payment to beneficiaries upon death
- Payment of health insurance premium while unemployed for 12 weeks or longer
| - Withdrawals are tax-free and penalty-free only for qualified education expenses (earnings are subject to taxes and penalties for most other withdrawals).
- Funds can be transferred from one child's account to an account for another child in the same family.
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