What It Means
A Coverdell education savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more (ESA) is a trust or custodial accountCustodial accountAn account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in. See more set up to pay a named child's qualified education expenses. Across every Coverdell account for the same child, total contributions can't exceed $2,000 in a year, and the right to contribute shrinks and then ends at higher incomes. Money must go in before the child turns 18, and the IRS requires any balance left at age 30 to be paid out within 30 days.
Try It: Check Your Coverdell Contribution Limit
Pick your filing status and enter your modified adjusted gross income (MAGI) to estimate how much you may put in for one child this year, using the IRS phase-out ranges.
Below the phase-out range: the full $2,000.
Inside the phase-out range, so the limit is reduced. Use Publication 970's worksheet for the exact figure.
Above the range, so you can't contribute this year.
The $2,000 cap covers every Coverdell account for the same child, from everyone who gives.
How People Say It
- "We use the Coverdell for her school uniforms and books."
- "Isn't a Coverdell just a small 529?"
- "We make too much to put money in a Coverdell."
The Breakdown
Worked example. Maria files as single with a MAGI of $100,000 and wants to open a Coverdell for her son.
| Step | Figure |
|---|---|
| Single phase-out range (IRS) | $95,000 to $110,000 |
| How far into the range she is | $5,000 of $15,000, one third |
| Reduction to the $2,000 limit | about $667 |
| Most she can put in this year | about $1,333 |
At $110,000 or more she couldn't contribute at all. A married couple filing jointly has a range twice as wide, $190,000 to $220,000. Publication 970's worksheet gives the exact number.
What the result means. The limit belongs to the child rather than the giver, so if a grandparent also puts money into a Coverdell for the same boy, both deposits count toward one $2,000 cap. To save more than $2,000 a year for one child, you'd need another account, such as a 529 plan529 planA state-sponsored, tax-advantaged account for education costs, where growth is free of federal income tax when spent on qualified expenses. See more, which has no federal yearly cap like this.
Coverdell ESA or 529 plan
| Coverdell ESA | 529 plan | |
|---|---|---|
| Yearly contribution limitContribution limitThe most the IRS lets you put into a tax-advantaged account in a year, such as a 401(k), IRA or HSA, often with a higher catch-up amount at older ages. See more | $2,000 per child, in total | No $2,000-style federal cap |
| Income limit to contribute | Yes, phases out at higher MAGI | None federally |
| Age rules | Contributions before 18; paid out by 30 | No federal age deadline |
Good to Know
Check your income against the IRS phase-out ranges in Topic 310 and Publication 970 before you contribute, because an excess contribution can bring an extra tax. Earnings are free of federal tax when the money pays qualified education expenses. On the FAFSAFAFSAThe Free Application for Federal Student Aid, the U.S. Department of Education form a student files each year to apply for federal aid for college or career school. See more, the 2026-2027 Federal Student Aid Handbook lists Coverdell accounts with 529 plans as education savings reported as parent investments for a dependent student. A tax professional can help if you're near the edge of the range.
FAQ
What is the Coverdell ESA contribution limit?
$2,000 a year per beneficiary, in total across all Coverdell accounts for that child, according to IRS Topic 310. It shrinks for single filers with MAGI between $95,000 and $110,000 and joint filers between $190,000 and $220,000.
What happens to a Coverdell ESA when the child turns 30?
The IRS requires any balance to be paid out within 30 days of the beneficiary turning 30. Contributions have to stop earlier, at 18.
Is a Coverdell ESA better than a 529 plan?
It depends on your goals. A Coverdell caps contributions at $2,000 a year and has an income limit, while a 529 has neither. A Coverdell also has the age 18 and 30 deadlines, so compare both before choosing.
Do It in Buhata
Goals, Accounts
Add the Coverdell in Accounts in Buhata and set a Goal (Plus) for this year's contribution, so you stop at the limit that fits your income.
Open BuhataRelated Terms and Categories
- 529 plan
A state-sponsored, tax-advantaged account for education costs, where growth is free of federal income tax when spent on qualified expenses.
- Custodial account
An account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in.
- Tax-advantaged account
An account the tax code rewards, such as a 401(k), IRA, HSA or 529 plan, where taxes are cut, delayed or skipped if you follow its rules.
- Contribution limit
The most the IRS lets you put into a tax-advantaged account in a year, such as a 401(k), IRA or HSA, often with a higher catch-up amount at older ages.
- Roth IRA
An individual retirement account funded with after-tax money, where qualified withdrawals, earnings included, come out tax-free.
- Compound interest
Interest paid on your original amount and on the interest it has already earned, so each year's interest is a little bigger than the last.
Sources
IRS, "Topic no. 310, Coverdell education savings accounts"; IRS, "Publication 970 (2025), Tax Benefits for Education"; Federal Student Aid, "2026-2027 Federal Student Aid Handbook, Filling Out the FAFSA Form"
- www.irs.gov/taxtopics/tc310
- www.irs.gov/publications/p970
- fsapartners.ed.gov/knowledge-center/fsa-handbook/2026-2027/application-and-verification-guide/ch2-filling-out-fafsa-form
Last updated .