Coverdell ESA
A Coverdell Education Savings Account (ESA) is another U.S. account for education savings. It can be used for K–12 and higher education expenses, but usually comes with smaller contribution limits and income-based eligibility restrictions.
The core idea (in plain English)
You contribute after‑tax dollars. If used for qualified education expenses, growth and withdrawals can be tax‑free.
Typical constraints
- Lower contribution limits than many 529 plans.
- Income limits can restrict who can contribute.
- Age-based rules may require using funds by certain deadlines.
When it can make sense
If you’re eligible and the ESA’s rules fit your needs, it can be a useful niche tool. Many families still default to a 529 for simplicity and higher capacity.
If you need higher contribution capacity or simpler administration, a 529 is often easier. If you’re eligible and want the Coverdell’s specific features, it can complement a 529.
Educational only. Always confirm eligibility, limits, and plan rules with IRS guidance or plan documents.