| The Coverdell Educational IRA is one of the many | | | | 6. You can simultaneously contribute to a account |
| college financing options you can avail. It is highly | | | | while contributing to a state college tuition program, |
| favorable in terms of tax and ease in savings. | | | | provided that these accounts are for a single child only. |
| Originally called Education IRA, it was revamped and | | | | 7. Pre-college expenses can also benefit from |
| renamed into the Coverdell Educational IRA that we | | | | account, so long as the expenses are eligible and |
| know today. This education IRA was renamed in | | | | within the scope of the allowable education expense. |
| honor after the late US Senator Paul Coverdell of | | | | Now, the one concern you are likely to ask is where to |
| Georgia. | | | | put the money? Actually, any financial institution that |
| There are also major changes in the features of the | | | | handles IRAs can help you. A bank, a brokerage, an |
| new and improved education IRA that allows many | | | | investment company and others, can help you set-up |
| families to benefit. These are: | | | | an account and manage the funds. You may use any |
| 1. Upgraded contribution limit from $ 500 to $ 2,000 per | | | | eligible investment medium that is offered by the |
| year. | | | | financial institution. It could be through mutual funds, |
| 2. Additional money can be made until the tax filing | | | | stocks, certificate of deposit, bonds and others. |
| deadline which is April 15. | | | | There is a limitless way of investing your funds, as long |
| 3. Adult family members, relatives, family friends and | | | | as the total contributions will not exceed the maximum |
| godparents can put money into the child's account as | | | | allowable limit of $ 2,000 per year, per student. If your |
| long it does not exceed the $ 2,000 yearly contribution | | | | child declines going to college, his Coverdell Educational |
| limit. An annual excess contribution tax of 6% will be | | | | IRA money can be withdrawn once he/she reaches |
| charged if the contributions exceed the limit. | | | | 30 years old. However, this is taxable. |
| 4. For a child with special needs, he/she can receive | | | | In order to save from taxes and to save money for |
| an account and contributions even if he/she is 18 and | | | | other younger kids in the family for college by turning |
| above | | | | over the unused funds from your older kid's Coverdell |
| 5. High earning parents have limited contributions. To | | | | Educational IRA. |
| make full contributions for your child's Coverdell | | | | Like most IRAs, if you wish to get more you need to |
| Educational IRA you should either be: | | | | save as early as possible. Once you have a child in |
| -A single person earning $ 95,000 or less per annum, | | | | the family, it is advisable to put up a Coverdell |
| filing individually | | | | Educational IRA as early as 6 months old. This helps |
| -Married parents earning $ 190,000, filing jointly | | | | parents establish a larger amount of funding for their |
| If you are a single taxpayer earning $ 100,000, or a | | | | child's college expenses, and the ease in paying for |
| married couple jointly filing taxes and earning $ | | | | these expenses are worth the effort. |
| 220,000, you are only allowed to make limited | | | | Remember the important aspects of funding for your |
| contributions. | | | | child's college education: the earlier the better and a |
| For higher earners, you cannot contribute at all as per | | | | strong funding through Coverdell Educational IRA can |
| IRS rules. | | | | make a huge difference. |