You may be able to contribute to a Coverdell Education Savings Account (ESA) to finance a beneficiary's qualified education expenses if your modified adjusted gross income is below the established amount. There is no limit to the number of accounts that can be established for a beneficiary; however the total contribution to all accounts on behalf of a beneficiary in any year cannot exceed $2,000.00. The contribution is NOT deductible. The designated beneficiary must be under the age of 18 years of age at the time the account is established, except for a special needs beneficiary.

A Coverdell ESA is a trust or custodial account set up in the United States solely for the purpose of paying qualified education expenses for the designated beneficiary of the account. In general, the designated beneficiary of a Coverdell ESA can receive tax free distributions to pay qualified education expenses. The distributions are tax free to the extent the amount of the distributions do not exceed the beneficiary's qualified education expenses. If a distribution does exceed the beneficiary's qualified education expenses, a portion of the distribution is taxable. For information on how to determine the part of any distribution that is taxable earnings, refer to Publication 970, Tax Benefits for Education.