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Traditional IRA |
Roth IRA |
Coverdell Education Savings Account |
| Features |
- Earnings grow tax-deferred, so you won't owe income taxes until you make withdrawals.
- If you're eligible*, your contributions are tax-deductible.
- IRS penalty-free withdrawals are allowed prior to age 59 ½ (up to a lifetime limit of $10,000) when the funds are used for qualifying expenses.**
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- Tax-free growth and more flexible withdrawal rules.
- Withdraw contributions are penalty- and tax-free at any time. Not required to start withdrawals at age 70½.
- After the account has been open five tax years, earnings can be withdrawn tax-free and penalty-free for any of these reasons: age 59½, disability, death, or a first-time home purchase.
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- Contributions are never tax-deductible.
- Withdrawals from a Coverdell ESA are both tax-free and penalty-free if used for qualified education expenses.
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| Eligibility |
Anyone. To qualify to make tax-deductible contributions, you must be younger than 70½ years old and have received income from compensation. |
Anyone who falls within the Modified Adjusted Gross Income limits set by the government.* |
You can contribute the full amount if you are a single filer with a modified adjusted gross income of $95,000 or less ($190,000 or less for joint tax filers).* |
| Maximum Annual Contribution |
$5,000
($6,000 ages 50+) |
$5,000
($6,000 ages 50+) |
Total contributions each year to each child's Coverdell ESA can't exceed $2,000. |
* Consult a tax advisor for your individual situation.
** Examples include: first time home purchase, higher education expenses, medical expenses, disability, IRS levy, divorce, or death.
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