Coverdell Educational Savings Account

    A Coverdell Education Savings Account is a custodial account established to pay the qualified education expenses of a designated beneficiary. Earnings within the account grow tax-deferred and are distributed tax-free when they are withdrawn exclusively to pay the beneficiary’s qualified education expenses.

    Tax Features

    Earnings from a Coverdell Education Savings Account grow tax-deferred.  

    Contribution Limits

    The maximum annual contribution is $2,000 per beneficiary, and can be made every year until the beneficiary reaches the age of 18. Contributions to a Coverdell Education Savings Account are not deductible for federal tax purposes. Any individual may contribute to a Coverdell Education Savings Account but income may limit your contribution:

    IF your filing status is... AND your Modified Adjusted Gross Income is... THEN you can make...
    single under $95,000 a full contribution
    between $95,000 and $110,000 a partial contribution
    $110,000 or more no contribution
    married filing jointly under $190,000 a full contribution
    between $190,000 and $220,000 a partial contribution
    $220,000 or more no contribution

    Contributions can be made from organizations such as a trust or corporation. Organizations do not have a contribution limitation due to income levels.

    Investment Minimums

    The minimum investment to open a Coverdell Education Savings Account at Selected Funds is $1,000 for Class S and $10,000 for Class D shares.

    The minimum additional investment to an existing account is $25.

    Making Distributions

    Distributions are tax-free for federal income tax purposes when used for the beneficiary’s qualified education expenses.  Non-qualified distributions are taxable and may result in a 10% penalty.  The following can be used for qualified distributions but are not limited to:

    1) Eligible Education Institutions

    • College, University, Vocational School, Elementary or Secondary
    • Public, Private or Religious school

    2) Eligible Education Expenses

    • Tuition and Fees
    • Books, Supplies and Equipment
    • Room and Board (rules apply)

    Additional Information

    Accumulated assets in a Coverdell Education Savings Account may affect a student’s ability to qualify for financial aid, or limit the availability of certain tax credits.

    Please consult your tax advisor before establishing this type of account.

    Review the Selected Coverdell Education Savings Account Disclosure Statement and Custodial Agreement for complete Coverdell Education Savings Account details including fees.

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