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Coverdale Savings Account (IRA)
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| We've offered these details to
help our members better assess with IRA is right for them...
Traditional
IRA | Roth
IRA | Main IRA Page
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Who can contribute?
Parents, relatives, or
friends of a designated child under age 18. Contributors
must meet the following Adjusted Gross Income Criteria
in the applicable tax year to be able to make full
contributions.
Changes to Coverdell Education Savings Accounts
Beginning in 2002 the annual contribution limit
increases from $500 to $2000 and all changes become
effective.
Coverdell Education Savings Account
Allowable Contribution Amount for Married, Joint Filers:
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Modified Adjusted
Gross Income
(MAGI)
of $190,000 or less
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MAGI Between
$190,000 and $220,000
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MAGI of
$220,000 or more
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Full Contribution
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Partial Contribution
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No Contribution
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Note: Members should consult their tax advisor for
additional information.
How are contributions treated?
 | All contributions are made on an after-tax basis.
No deductions are allowed from current taxes.
Contributions are not allowed during any tax year in
which a contribution is made to a "qualified
state tuition program". |
Annual contribution limit:
| $2000 per qualified child per tax year, beginning
in 2002.
| This can be made over and above the maximum annual
contribution to Traditional and Roth IRAs. |
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How are distributions treated?
Distributions are not taxable if the distribution is
used during the tax year to pay certain higher education
expenses for the child such as:
| Post-secondary tuition,
| Fees,
| Books,
| Supplies,
| Equipment, and
| Certain room and board expenses. |
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Withdrawals are tax-free and penalty free if used for
qualified higher education expenses within designated
limits.
When are distributions subject to a 10% penalty
tax?
Distributions that exceed educational expenses for
the year; or those that are made for reasons other than
to pay qualified higher education expenses must be
included in the child's gross income. A 10% premature
distribution penalty applies unless the distribution is:
| Due to the death or disability of the child; or
| Due to a scholarship payment received. |
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When must required distributions begin?
| All funds must be withdrawn by the time the child
(beneficiary) reaches age 30.
| Unused earnings will be taxable upon distribution.
| Funds not used by one child can be transferred to
another child in the family. |
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The deadline for Education IRA contributions is 12/31
for the current tax year.
Note:
This is provided for informational
purposes and should not be considered tax advice. For
tax advice, you should consult your tax advisor or
accountant. You may also call the IRS Information
Hotline at 1-800-829-1040, or visit their IRA
and Tax Implications web site.
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