Education Savings Account
The Education Savings Account offers the potential for tax-free investment growth when you use the account to pay for a child's qualified higher education expenses. Investors may contribute up to a total of $2,000 per child per year.
Who Can Invest?This option is available to you if you have a modified adjusted gross income (MAGI) below $220,000 for joint filers, or below $110,000 if you're single.1 A child under age 18 is named as the beneficiary on the account, with a parent or legal guardian named as the responsible individual.You can contribute to both Education Savings Accounts and qualified tuition programs (529 plans) in the same year for the same beneficiary.
Contributions to an Education Savings Account may be made up to the tax-filing deadline (not including extensions) and designated for the prior tax year.
Advantages
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Tax-Free Growth Investments in an Education Savings Account can grow tax-free – a powerful benefit over time.
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Flexible ContributionsAny qualifying individual can contribute to an Education Savings Account, making this an ideal vehicle for grandparents or other relatives who wish to give a gift to the child.
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Adult ControlA parent or guardian can maintain control over the account until the child reaches age 30, ensuring that the assets are used for education.
Things to Consider
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It's Not Enough on Its OwnEven at $2,000 per year, the Education Savings Account alone likely won't pay for your child's education. It's only part of an overall financial plan.
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May Limit Eligibility for Other ProgramsIn years when you take Education Savings Account distributions, you may not be able to take advantage of certain tax credits, such as the Hope Scholarship Credit and the Lifetime Learning Credit.
Using the MoneyAlthough the account is in the child's name, the parent or guardian named as the account's responsible individual controls the Education Savings Account until all of its assets are withdrawn. No contributions may be made after the child turns 18, but the account can remain open until the beneficiary turns 30. If the funds haven't been used by that time, the account balance must be withdrawn within 30 days. In that event, applicable income taxes, plus a possible 10% tax penalty, would apply to earnings.
Eligible ExpensesWithdrawals from an Education Savings Account are free from federal income taxes as long as they're used to cover eligible education expenses.
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Tuition, fees, academic tutoring, special needs services, books, supplies, and other equipment incurred with the enrollment or attendance of the beneficiary at a public, private, or religious school providing elementary or secondary education (kindergarten through grade 12), as well as college.
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Room and board, uniforms, transportation, and supplementary items or services (including extended day programs) required or provided by such a school in connection with enrollment. Students enrolled half-time or more may also make tax-free withdrawals to pay for room and board.
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The purchase of any computer technology or equipment if the services are to be used by the beneficiary during any of the years the beneficiary is in school.
If the money is used for other purposes, earnings are taxed as ordinary income and may be subject to an additional 10% penalty. If the child named on the account doesn't attend college, the account can be transferred to another member of his or her family to pay for higher education expenses.
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Next Steps
Give the gift that lasts a lifetime – start investing in your child's education today!
Specialists are available at 1-800-359-3379 24 hours a day, 7 days a week to help you get started. 
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