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Coverdell accounts: Not gone, but forgotten?

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. I never hear about Coverdell IRAs anymore. Have they been repealed? L.P.S., Orlando, Fla.

A. No. You can still use a Coverdell Education Savings Account (CESA), sometimes called the “Education IRA,” as a tax-deferred way to save for school. Dis­­tri­­bu­­tions are tax-free if they are used to pay for qualified education expenses. But the relatively low annual contribution limit of $2,000 has discouraged many parents of college-bound children. There are other options, like Section 529 plans, that generally allow you to accumulate more for college.  

Tip: This isn’t just for higher education. A CESA may also be used for pay for qualified K-12 education expenses.

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