Coverdell ESA Contributions

Amounts and timing of contributions.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What are the Coverdell ESA contribution limits?

Each beneficiary's account (i.e., the child/student who will benefit) may receive contributions totaling $2,000 annually, regardless of how many donors contribute to the account. Contributions must be in cash and must be made before the child reaches his/her eighteenth birthday, unless he or she is a Special Needs Student. Contributions must be made by the due date of the tax return, April 15 (not including extensions).

Who can make a Coverdell ESA contribution?

The donor must meet certain income requirements in order to be eligible to make a full or partial contribution to an ESA. Joint filers who make $190,000 or less and single filers who make $95,000 or less may make a full contribution per student.

When making a contribution to a Lord Abbett ESA, the donor does not have to be related to the student. However, if the donor is not the parent/legal guardian, then the donor has no control over the account once the contribution is made.

What happens if the total Coverdell ESA contribution exceeds $2,000?

Excess contributions will be returned to the beneficiary (the student). The deadline to remove excess contributions from the account without incurring a 10% penalty on earnings is June 1 of the tax year following the year in which the contribution was made. For example, if you made a $3,000 Coverdell ESA contribution in December 2012, your child would have until June 1, 2013, to remove $1,000 (the amount over of the maximum). The same would be true if the contribution were made on January 4, 2013, for the 2012 year (see above). In the latter case, you would have the choice, if the student were still eligible (see "Coverdell ESA Eligibility" rules for more information.), to receive contributions, to have $1,000 applied toward 2013's limit.

Excess Coverdell ESA contributions that are not withdrawn timely will also be subject to a 6% excess tax.