Education savings accounts offer you a tax-free way to save up to $2,000 a year for your child’s or other student’s qualified elementary, secondary, and college expenses. (Education savings accounts were previously called education IRAs.)

Although contributions are not tax deductible, earnings accumulate tax deferred and withdrawals to pay for qualified education expenses are tax free.

The eligibility rules

Parents, grandparents, family, friends, and anyone else who meets the income limits -- including children themselves -- are eligible to contribute to an education savings account. If your income exceeds the eligibility limits, you can gift money to a child and he or she can make the contribution (assuming the child meets the income limits).

Modified adjusted gross income limits

Eligibility is based on your modified adjusted gross income, which is generally the same as your adjusted gross income as figured on your federal income tax return. (If you excluded any income earned abroad or from certain U.S. territories or possessions, you must add those items back to your income.)

• If you’re a single taxpayer and your income is under $95,000, you can contribute up to $2,000. If your income is between $95,000 and $110,000, you can make a partial contribution.
• If you’re a married taxpayer and file jointly and your joint income is under $190,000, you can contribute up to $2,000. If your income is between $190,000 and $220,000 you can make a partial contribution.
  

For more information

IRS Publication 970, Tax Benefits for Higher Education, www.irs.gov.

Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.

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