First Hawaiian Bank

Coverdell Education Savings Act

Anyone subject to certain Modified Adjusted Gross Income (MAGI) limits may contribute to a Coverdell Education Savings Account for anyone under age 18. The annual investment is limited to $2,000 per child. The funds can be withdrawn tax-free for qualified education-related expenses.

 

Who is eligible to contribute to a Coverdell Education Savings Account?

Single filers earning up to $95,000 modified annual gross income (MAGI) annually and couples earning up to $190,000 MAGI annually can contribute up to $2,000 per child under age 18 each year. Above these limits, the ability to contribute is phased out. If income exceeds $110,000 for single filers and $220,000 for joint filers, no contribution is allowed. Entities may also contribute to the Coverdell Education Savings Account without regard to MAGI limits

Qualified education-related expenses for elementary, secondary and higher education include:

  • Tuition
  • Fees
  • Books
  • Supplies
  • Equipment
  • Academic tutoring (elementary & secondary education)
  • Special needs services
  • Room and board expenses
  • Uniforms (elementary & secondary education)
  • Transportation (elementary & secondary education)

Rollover and Beneficiary Information

The Coverdell Education Savings Account must be distributed or rolled over into another Coverdell Education Savings Account for another eligible family member by the time the beneficiary reaches age 30. This change may also occur if the beneficiary has completed college and there are funds remaning or for any other reason at any time provided that the new beneficiary is under age 30.

Eligible Family Members

More than one change in beneficiary can be made to the following family members:

• Parents, stepparents, or parent-in-laws

• Spouses

• Brothers and sisters, stepbrothers or stepsisters

• Children and their spouses

• Stepchildren and their spouses

• Nephews or nieces

• Uncles or aunts

• First Cousins

It is important to remember that even with this extended range of family members, contributions can be made only for those under the age of 18. However, transfers and rollover contributions can be made for beneficiaries under the age of 30.

For your specific situation, please consult your tax advisor.

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