Coverdell ESA

A Coverdell Education Savings Account (also known as an Education Savings Account, a Coverdell ESA, a Coverdell Account, or just an ESA, and formerly known as an education individual retirement account), is a tax-advantaged investment account in the United States designed to encourage savings to cover future education expenses (elementary, secondary, or college), such as tuition, books, uniform, etc. (for the same year as the distribution). It is found at section 530 of the Internal Revenue Code (26 U.S.C. § 530). Coverdell ESAs were first introduced in 1997, under the Taxpayer Relief Act of 1997.

The tax treatment of Coverdell ESAs is much the same as that of 529 plans with a few important differences. Like a 529 plan, Coverdell ESAs allow money to grow tax deferred and proceeds to be withdrawn tax free for qualified education expenses at a qualified institution. However the definition of qualified expenses in an ESA includes primary and secondary school, not just college and university.

The account is named for its primary champion in the U.S. Senate, the late Senator Paul Coverdell (R-GA).

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