Education Savings Account

Education Savings Accounts

A Coverdell ESA is a trust or custodial account created solely for the purpose of paying qualified education expenses for the designated beneficiary of the account.  To qualify, the beneficiary must be under the age of 18 or have special needs when the account is established.

Open an ESA


There is no limit to the number of accounts that can be established for any beneficiary, nor are there restrictions on who or which organizations can create or contribute to an account. Contributions are NOT tax deductible and must be made in cash, before the beneficiary’s 18th  birthday (except special needs beneficiaries) and by the due date of the contributor’s tax return (not including extensions).

ESA Contributions

Tax Status

Contributions to an ESA are not tax deductible; however, the account’s investment earnings accumulate tax free.  If a distribution exceeds the beneficiary’s qualified education expenses for that year, a portion of the distribution attributable to investment earnings is taxable.


Account funds can be distributed tax free at any time to pay the beneficiary’s qualified elementary, secondary, and post-secondary education expenses.  Any amounts remaining in the ESA account must have been used to pay for qualified education expenses, distributed to the beneficiary, or transferred to other qualified members of the beneficiary’s family when the designated beneficiary reaches age 30(except special needs beneficiaries) or if s/he dies, then within 30 days of death.  A contribution to a qualified tuition plan is a qualified if made on behalf of the ESA beneficiary.

Qualified Elementary and Secondary Education Expenses

For a distribution to qualify for tax-free status, the following expenses must be incurred by the designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school:

  • Tuition and fees
  • Books, supplies, and equipment
  • Academic tutoring
  • Special needs services for a special needs beneficiary

In addition, the following expenses must be required or provided by the school in connection with attendance or enrollment:

  • Room and board
  • Uniforms
  • Transportation
  • Supplementary items and services (including extended day programs)

The purchase of certain computer technology, equipment, and Internet access used by the beneficiary and the beneficiary’s family is a qualified expense.

Qualified Higher Education Expenses

The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school.

  • Tuition and fees
  • Books, supplies, and equipment

Students must be enrolled at least half-time for room and board expenses to be qualified, and those expenses cannot be more than the greater of:

  • The allowance, as determined by the school and included in the cost of attendance for federal financial aid purposes.
  • The actual amount charged if the student is residing in housing owned or operated by the school.

Rollovers and Other Transfers

Any amount distributed from an ESA is not taxable if it is rolled over within 60 days to another ESA for the benefit of the same beneficiary or his/her family members (including a spouse) who are under age 30 (except special needs beneficiaries).The beneficiary’s interest can also be transferred to a spouse or former spouse through a divorce settlement.  Or, the designated beneficiary can simply be changed to a member of the beneficiary’s family who is under age 30 or a special needs beneficiary.  Eligible family members include:

  • Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them
  • Brother, sister, stepbrother, or stepsister
  • Father or mother or ancestor of either
  • Stepfather or stepmother
  • Son or daughter of a brother or sister
  • Brother or sister of father or mother
  • Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
  • The spouse of any individual listed above
  • First cousin