Expect to be paying elementary or secondary school costs in the future? Consider an ESA
As the school year draws to a close, it’s a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if you have young children.
One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions aren’t limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.
Here are some other key ESA benefits:
- Although contributions aren’t deductible, plan assets can grow tax-deferred.
- You remain in control of the account — even after the child is of legal age.
- You can make rollovers to another qualifying family member.
The annual contribution limit is $2,000 per beneficiary. However, the ability to contribute is phased out based on income.
Would you like more information about ESAs or other tax-advantaged ways to fund your child’s — or grandchild’s — education expenses? Contact us!