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Education IRA

An education IRA is a trust or account that is made in the name of a beneficiary for their educational needs. From the birth of a beneficiary until their 18th birthday, the education IRA is eligible for deposits. IRAs are exclusive to cash only, and cash of not more than $500 per year. This $500 per year is an account total, not a per-person contribution total. As a result, a beneficiary can receive only a maximum of $500 per year, except in the case of a rollover contribution. However, any person can contribute into that $500 total, as long as their adjusted gross income is not in excess of $110,000. For contributers over that income level, the contribution will be lowered automatically; that is, their maximum contribution will not be achieved. In addition to these limitations of AGI, there is also the loss of tax to be considered - while the beneficiary's money is tax deferred, there might be a los of tax credits, and taxes could be paid if the money is not properly used.

Fast Facts

  • Coverdell savings account are a new for of IRA that allows for up to $2,000 per year

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