Insights & Ideas

Coverdell Education Savings Accounts

Coverdell Education Savings Accounts offer a highly flexible way to build funds for college on a tax-free basis. The maximum annual contribution limit for an ESA is $2,000 for each child under age 18. Benefits include:

  • Tax-deferred growth — contributions are not tax deductible, but assets in these accounts are tax deferred, meaning they grow tax free.
  • Tax-free withdrawals — assets are withdrawn federally tax free as long as the money is used to pay for education costs such as tuition, room and board.
  • Eligibility — anyone can contribute, subject to certain income limits. Any individual whose modified adjusted growth income for the year is less than $110,000 ($220,000 for a joint return) can contribute.
  • Investment flexibility — choose among a broad range of investments, including stocks, bonds, mutual funds and more. You can also shift your investments as your financial goals and/or risk tolerance changes. This gives you freedom to structure an investment plan to help keep pace with college cost inflation and help you reach your college funding goal.
  • Beneficiary flexibility — if a child does not use the money in his or her ESA, the assets can be transferred to another child in the same family.

To learn more or open a Dreyfus Coverdell Education Savings Account, call 1-800-DREYFUS.