What is Coverdell education savings account?
In short
A Coverdell education savings account allows nondeductible contributions of up to $2,000 a year per beneficiary. Earnings are tax-free if used for qualified education expenses, including elementary and secondary school costs.
Key takeaways
- The contribution limit phases out at higher levels of the contributor's modified adjusted gross income.
- Contributions must stop at age 18, and the account generally must be used by age 30, except for special-needs beneficiaries.
- Section 529 plans have much higher contribution limits.
Where it's tested
TCP: Personal Financial Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An employee receives disability benefits under a policy for which the employer paid all premiums and excluded them from the employee's taxable wages. How are the benefits taxed?