Cornbelt Financial
  • Home
  • About
    • Our Team
    • Who We Serve
    • Values
  • Services
    • Tax Preparation & Planning
    • Bookkeeping, Payroll, & Consulting
    • Financial Planning
    • Investment Advising
    • Succession Planning
    • Business Valuation
  • Blog
  • Contact
  • Home
  • About
    • Our Team
    • Who We Serve
    • Values
  • Services
    • Tax Preparation & Planning
    • Bookkeeping, Payroll, & Consulting
    • Financial Planning
    • Investment Advising
    • Succession Planning
    • Business Valuation
  • Blog
  • Contact

Coverdell ESAs: The tax-advantaged way to fund elementary and secondary school costs

6/9/2017

0 Comments

 
Picture
With school letting out you might be focused on summer plans for your children (or grandchildren). But the end of the school year is also a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if the children are in grade school or younger.

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.

Other benefits

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.
A sibling or first cousin is a typical example of a qualifying family member, if he or she is eligible to be an ESA beneficiary (that is, under age 18 or has special needs).

Limitations

The ESA annual contribution limit is $2,000 per beneficiary. The total contributions for a particular ESA beneficiary cannot be more than $2,000 in any year, no matter how many accounts have been established or how many people are contributing.

However, the ability to contribute is phased out based on income. The phaseout range is modified adjusted gross income (MAGI) of $190,000–$220,000 for married couples filing jointly and $95,000–$110,000 for other filers. You can make a partial contribution if your MAGI falls within the applicable range, and no contribution if it exceeds the top of the range.

If there is a balance in the ESA when the beneficiary reaches age 30 (unless the beneficiary is a special needs individual), it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to a 10% penalty. But these taxes can be avoided by rolling over the full balance to another ESA for a qualifying family member.

Would you like more information about ESAs or other tax-advantaged ways to fund your child’s — or grandchild’s — education expenses? Contact us!

© 2017
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Author

    Adam Carr, MBA, EA

    Archives

    May 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    February 2016
    January 2016
    December 2015
    November 2015

    Categories

    All
    Business
    Charity
    Education
    Estate Planning
    Identity Protection
    Investments
    Life Events
    Medical
    Real Estate
    Tax Forms
    Tax Law
    Tax Planning
    Tax Reform

    RSS Feed

Picture
Picture
© COPYRIGHT Cornbelt Financial, LLC 2023. ALL RIGHTS RESERVED.

There are no warranties implied.
Cornbelt Financial, LLC (“RIA Firm”) is a registered investment advisor located in Denver, Colorado. Cornbelt Financial, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Cornbelt Financial, LLC’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Cornbelt Financial, LLC’s website on the internet should not be construed by any consumer and/or prospective client as Cornbelt FInancial, LLC’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by Cornbelt Financial, LLC with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Cornbelt Financial, LLC, please contact the state securities regulators for those states in which Cornbelt Financial, LLC maintains a registration filing. A copy of Cornbelt Financial, LLC’s current written disclosure statement discussing Cornbelt Financial, LLC’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Cornbelt Financial, LLC upon written request. Cornbelt Financial, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Cornbelt Financial, LLC’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
This website and information are provided for guidance and information purposes only.  Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy.  This website and information are not intended to provide investment, tax, or legal advice.
Insurance products and services are offered and sold through individually licensed and appointed insurance agents.