ESA Limits

An Educational Savings Account (ESA) is an account that is set up for college savings. It has special tax benefits, but it also has yearly contribution limits.

Requirements

The beneficiary of an ESA must be either under the age of 18 or of a special need.

Limits

As of tax year 2008, the maximum yearly contribution to an ESA for a single beneficiary was $2,000.

Multiple Accounts

A beneficiary may have more than one ESA opened, but the total contributions to all accounts opened in his name must not be more than $2,000 per year.

Benefits

While you won't receive a tax deduction for contributing to an ESA, the money in the account will not be taxed until it is withdrawn.

Considerations

If the money taken from the account is not more than the beneficiary's approved education expenses at a qualified school, then that money also will not be subject to taxation.

References

• IRS: Coverdell Education Savings Accounts