Question for the Money Doctors
Question submitted on Apr 7, 2017.
QuestionMy daughter is going to Kindergarten this September. If I open a Coverdell Education Savings Account and put in $2000.00 now, can I start using the money for this year's tuition?
Yes, Coverdell ESA distributions may be made at any time. Keep in mind that withdrawals from ESAs are only tax-free if the funds are used for qualified education expenses of the designated beneficiary. You will have to verify with the educational institution that their tuition will be considered qualified education expenses. Other possible qualified expenses may include books, supplies, tutoring, uniforms, transportation, and special needs services but are dependent upon attendance and if they items or services are required or provided by the elementary and secondary school that your daughter is attending.
Annual contributions to Coverdell ESAs cannot exceed $2,000 per student per calendar year. While investment gains can be tax-free when withdrawn for qualified education expenses, contributions are non-deductible.
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