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Traditional IRA |
Roth IRA |
Coverdell Education Savings Account |
| Who can contribute? |
Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI:*
- Up to $107,000 (single filers)
- Up to $169,000 (joint filers)
Reduced contributions allowed for higher incomes (up to $122,000 for single filers and $179,000 for joint filers)
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Anyone under age 70½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)
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Anyone who has a MAGI *
- Single filer: up to $95,000
- Joint income for filers:
For 2002 and later years up to $190,000
Some people with higher MAGI may be able to make smaller contributions
Contributions not allowed after the beneficiaries reach age 18 (except for 2002 and later years contribution after age 18 allowed for special needs beneficiaries)
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| How much can I contribute? |
$5,000 for 2012
Higher limit if age 50 or older
Can not exceed compensation
Reduced by contributions to traditional IRAs
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$5,000 for 2012
Higher limit if age 50 or older
Can not exceed compensation
Reduced by contributions to traditional IRAs
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$2,000 per child for 2002 and later years
Limit applies to all Education IRAs (also known as the Coverdell Education Savings Account) for the same child.
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| Who can make contributions? |
No one can deduct contributions
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Fully deductible contributions:
- Single individuals not active in employer retirement plans (regardless of income)
- Single individuals active in employer retirement plans with MAGI* of $56,000 ** or less.
- Married couples with neither spouse active in an employer retirement plan (regardless of income)
- Married individuals active in employer retirement plans with spouses who are, as long as MAGI * is $169,000 ** or less.
Individuals with incomes exceeding the above limits may be able to deduct an amount that is less than the amount that can be contributed
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No one can deduct contributions
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What are
the tax advantages? |
Regular contributions can be withdrawn tax- and penalty-free at any time.
After the account has been open five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons: are 59½, disability, death, or a first time home purchase ***
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Earnings grow tax-deferred until withdrawn
Contributions may be tax-deductible
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Withdrawals for certain qualified education expenses are tax-free
Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age
For 2002 and later years, qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary education
For 2002 and later years, a beneficiary may receive tax-free distributions from an Education IRA in the same year he or shy claims the Lifetime Learning or HOPE Scholarship tax credits.
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| When can I withdraw without restrictions? |
Earnings are tax-free is account is open for five tax years and withdrawn for a qualified reason (age 59½, disability death, or a first-time home purchase ***)
Not required to start withdrawals at age 70½.
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Withdraw penalty-free for any of the following reasons:
Qualified higher-education expenses
First-time home purchase ***
Age 59½
Disability
Qualifying medical expenses exceeding 7.5% of adjusted gross income
Payment to beneficiaries upon the owner's death
Payment of health insurance premiums while unemployed for 12 weeks or longer
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Withdrawals are tax- and penalty-free only for qualified education expenses (earnings are subject to tax and penalty for most other withdrawals)
Funds can be transferred from one child's account to an account for another child in the family
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