The good news is that you can use this money for more than just college. You can pay for primary, or pre-college, school costs, too.
With a Coverdell Plan, you can deposit money into an Education Savings Account (ESA) and watch it grow, tax-free. As long as you use that money for education purposes, you won’t have to pay federal taxes on it.
What you can expect
There are positive and negative parts of this plan. The good news is that you can use this money for more than just college. You can pay for primary, or pre-college, school costs, too.
The bad news is that there is an age limit and a maximum income limit.
The money must be used by the time your child is 30.
You usually can’t open an account if you make more than $95,000 per year, or $190,000 as a married couple.
Money is tax-free, as long as it’s used for qualified educational expenses. If you use it for something else, you have to pay taxes and a 10 percent penalty fee.
The money from this account belongs to your child after your child turns 18, even if you don’t use it to pay for college.
You can open as many ESAs as you want, but you can only save $2,000 a year per child.
You can save money in both a 529 and ESA plan, at the same time!