With the rising cost of higher education, many families must plan to build a fund for their children’s college expenses. The Coverdell Education Savings Account was created solely for this purpose. It can help many families prepare for this financial challenge.

Taxpayers may deposit up to $2,000 per year into an Education Savings Account (“ESA”) for a child under age 18 (or a special needs student of any age). Parents, grandparents, other family members, friends, and a child him/herself may contribute to the child’s ESA, provided that the total contributions for the child during the taxable year do not exceed the $2,000 limit and the individual contributor’s income does not exceed certain limits. Corporations and other entities may make contributions without being subject to the income limits. Contributions maintain tax-free growth potential until distributed. The child will not owe tax on any withdrawal from the account if the child’s qualified education expenses for the year equal or exceed the amount of the withdrawal.

If the child does not need the money for education, the account balance can be rolled over to the ESA of certain family members who can use it for their qualified education expenses. Earnings allocated to amounts withdrawn from an ESA that exceed the child’s qualified education expenses in a taxable year are generally subject to income tax and to a penalty tax of 10 percent.

Anyone whose AGI is not in excess of $220,000 (joint returns) or $110,000 (single returns) may contribute on behalf of a designated beneficiary who has not reached the age of 18.

Tax filing due date, no extensions.

Fees may vary. Please consult your Garden State Securities, Inc Financial Advisor for more information.

$2,000 per child per year. Contribution limit is phased out for AGIs from $190,000 to $220,000 (joint returns) and from $95,000 to $110,000 (single returns).

Not permitted.

Non-deductible contributions permitted. See “Total Contributions” for contribution limits.

No catch up contributions.

Tax filing due date. No extensions.

Tax laws are complex and subject to change. Garden State Securities, Inc. its affiliates and financial advisors do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer.
Individuals are urged to consult their personal tax or legal advisors to understand the tax and related consequences of any actions or investments described herein.