Short Answer
A Coverdell education savings account (ESA) under IRC §530 lets you save up to $2,000 per beneficiary per year in an account that grows tax-free and pays out tax-free for qualified K-12 and college expenses. The $2,000 limit phases out for individual contributors whose modified AGI is between $95,000 and $110,000 (single, head of household, married filing separately, or qualifying surviving spouse) or $190,000 and $220,000 (married filing jointly). Contributions are not deductible and must be made by the unextended tax-return due date. Distributions are tax-free to the extent of qualified education expenses; any excess is taxed on the earnings portion at the recipient's ordinary rate plus a 10% additional tax under §530(d)(4)(A), with exceptions for scholarship, death, disability, and service academy attendance. Contributions must stop when the beneficiary turns 18, and the balance must be paid out by age 30 (special needs beneficiaries excepted). All of these figures are statutory and unchanged for 2025 and 2026; OBBBA did not amend §530.
How the Coverdell ESA Calculation Works
This tool runs two separate calculations under IRC §530. Contribution mode applies the §530(c) MAGI phase-out to the $2,000 cap. Distribution mode applies the §72 earnings ratio and the §530(d)(4) additional tax. For the full rules, including age limits, qualified expenses, and Coverdell-vs-529 coordination, see the Coverdell ESA Guide.
Contribution Mode · Step 1: Pick the Phase-Out Range Confirmed
The phase-out threshold and range depend only on whether the contributor files a joint return. Married filing jointly uses a $190,000 threshold and a $30,000 range (phase-out ends at $220,000). Single, head of household, married filing separately, and qualifying surviving spouse all use a $95,000 threshold and a $15,000 range (phase-out ends at $110,000), under IRC §530(c)(1)(A) and (B).
Contribution Mode · Step 2: Apply the Proportional Reduction Confirmed
If MAGI is at or below the threshold, the full $2,000 is allowed. If MAGI is at or above the top of the range, the limit is $0. In between, the reduction is proportional: Reduced Limit = $2,000 × [1 − (MAGI − threshold) ÷ range]. A single filer with $102,500 MAGI is halfway through the $15,000 range, so the limit is $1,000. This calculator rounds the reduced limit to the nearest dollar; IRS Pub 970 Worksheet 6-2 is the authoritative source for the exact figure.
Distribution Mode · Step 1: Earnings Ratio Confirmed
Earnings Ratio = Form 1099-Q Box 2 (earnings) ÷ Box 1 (gross distribution). This ratio determines what fraction of any non-qualified portion is taxable earnings. A $10,000 distribution with $3,000 of earnings has a 30% earnings ratio, so 30% of any non-qualified piece is taxable income and subject to the 10% additional tax.
Distribution Mode · Step 2: Qualified vs Non-Qualified Split Confirmed
Qualified Distribution = min(Distribution, Qualified Expenses). Non-Qualified Distribution = Distribution − Qualified Distribution. Non-Qualified Earnings = Non-Qualified Distribution × Earnings Ratio. Unlike a 529 plan, a Coverdell ESA has no per-use dollar cap on distributions; the only limit is the beneficiary's actual qualified K-12 and higher education expenses.
Distribution Mode · Step 3: Income Tax and 10% Additional Tax Confirmed
Federal Income Tax = Non-Qualified Earnings × Recipient's Marginal Rate. 10% Additional Tax = max(0, Non-Qualified Earnings − Exception Amount) × 10%, under §530(d)(4)(A) and reported on Form 5329. The scholarship, death, disability, and service academy exceptions under §530(d)(4)(B) waive the 10% but never the ordinary income tax on the earnings.
Contribution Phase-Out Walkthrough
The single most common Coverdell surprise is the income phase-out: high earners often assume they can simply put in $2,000 and find their allowed amount is reduced or zero. The table shows the allowed contribution at different MAGI levels for both filing groups.
Allowed Coverdell Contribution by MAGI (per contributor, per beneficiary)
| MAGI (single / HOH / MFS / QSS) | Allowed | MAGI (married filing jointly) | Allowed |
|---|
| $95,000 or less | $2,000 | $190,000 or less | $2,000 |
| $98,750 | $1,500 | $197,500 | $1,500 |
| $102,500 | $1,000 | $205,000 | $1,000 |
| $106,250 | $500 | $212,500 | $500 |
| $110,000 or more | $0 | $220,000 or more | $0 |
Two planning points follow directly from the table. First, the $2,000 cap is per beneficiary aggregate, so if a parent is phased out, a grandparent, other relative, or even the beneficiary can contribute within the same $2,000 ceiling. Second, corporations and trusts face no income limit at all under IRS Topic 310, so a family business can fund a child's Coverdell when the individual owners are over the threshold.
Frequently Asked Questions
How much can I contribute to a Coverdell ESA in 2026?
The maximum contribution to a Coverdell education savings account is $2,000 per beneficiary per year, aggregated across all accounts and all contributors. This $2,000 limit under IRC §530(b)(1)(A)(iii) is statutory and is not adjusted for inflation, so it is the same for 2025 and 2026. The limit is reduced for individual contributors whose modified adjusted gross income exceeds $95,000 (single, head of household, married filing separately, or qualifying surviving spouse) or $190,000 (married filing jointly), and reaches zero at $110,000 single / $220,000 joint. Contributions must be made in cash by the unextended due date of the contributor's tax return (April 15) and are not deductible. Corporations and trusts can contribute regardless of income.
What is the Coverdell ESA income limit for 2026?
Under IRC §530(c), the $2,000 contribution limit phases out for individual contributors based on modified adjusted gross income (MAGI). For single, head of household, married filing separately, and qualifying surviving spouse filers, the phase-out runs from $95,000 to $110,000 of MAGI. For married filing jointly, it runs from $190,000 to $220,000. Within the range, the limit is reduced proportionally: a single filer with $102,500 MAGI (halfway through the $15,000 range) can contribute up to $1,000. These thresholds are statutory and not inflation-indexed, so they have not changed since 2002 and are identical for 2025 and 2026. MAGI for this purpose is adjusted gross income increased by the foreign earned income, foreign housing, and Puerto Rico/possessions exclusions under §911, §931, and §933.
What expenses qualify for a Coverdell ESA?
Coverdell ESA distributions are federal-income-tax-free when used for qualified education expenses, which under IRC §530(b)(2) include both qualified higher education expenses (defined by §529(e)(3): tuition, fees, books, supplies, equipment, and reasonable room and board for at-least-half-time students at eligible postsecondary institutions) AND qualified elementary and secondary (K-12) education expenses under §530(b)(3). K-12 qualified expenses are broad: tuition, fees, academic tutoring, special needs services, books, supplies, equipment, room and board, uniforms, transportation, supplementary items and services (including extended day programs) required or provided by the school, and computer technology, equipment, or internet access used by the beneficiary and family during school years. The K-12 school can be public, private, or religious.
Can I have both a Coverdell ESA and a 529 plan?
Yes. A beneficiary can have both a Coverdell ESA and a 529 plan, and you can contribute to both in the same year. The $2,000 Coverdell limit and the 529 contribution levels are separate. When you take distributions from both accounts in the same year and the combined distributions exceed the beneficiary's total qualified expenses, IRC §530(d)(2)(C)(ii) requires you to allocate the qualified expenses between the two distributions to determine the tax-free portion of each. You cannot use the same dollar of expense to qualify both a Coverdell distribution and a 529 distribution. The same expense also cannot be used to claim the American Opportunity or Lifetime Learning credit AND qualify a Coverdell distribution, under the §530(d)(2)(C) and §530(d)(2)(D) no-double-benefit rules.
What happens to a Coverdell ESA when the beneficiary turns 30?
Under IRC §530(b)(1)(E), any balance remaining in a Coverdell ESA must be distributed within 30 days after the beneficiary attains age 30. The earnings portion of that forced distribution is taxable as ordinary income and is subject to the 10% additional tax under §530(d)(4)(A) because it is not used for qualified education expenses. There are two ways to avoid this: roll the balance into a Coverdell ESA for a member of the beneficiary's family who is under age 30 (tax-free under §530(d)(5)), or change the beneficiary to a qualifying family member under age 30 (tax-free under §530(d)(6)). The age-18 contribution cutoff and the age-30 distribution rule do not apply to a special needs beneficiary.
Are Coverdell ESA distributions taxable?
Coverdell ESA distributions are tax-free to the extent they do not exceed the beneficiary's qualified education expenses for the year, under IRC §530(d)(2)(A). If the total distribution exceeds qualified expenses, the earnings portion of the excess is taxable to the beneficiary as ordinary income. The taxable amount is determined using the earnings ratio: earnings divided by the account balance (or, on Form 1099-Q, Box 2 earnings divided by Box 1 gross distribution). Only the earnings portion is ever taxed; the basis (your after-tax contributions) is never taxed because it was already taxed before contribution. The earnings on a non-qualified distribution are also subject to a 10% additional tax under §530(d)(4)(A) unless an exception applies.
What is the 10% additional tax on a Coverdell ESA?
Under IRC §530(d)(4)(A), the taxable earnings portion of a non-qualified Coverdell ESA distribution is subject to a 10% additional tax on top of the ordinary income tax. Four exceptions waive the 10% additional tax (but the earnings remain taxable as ordinary income): (1) distributions made on or after the death of the beneficiary; (2) distributions attributable to the beneficiary's disability under §72(m)(7); (3) distributions made on account of a tax-free scholarship, veterans' education assistance, or employer-provided assistance received by the beneficiary, up to the amount of that assistance; and (4) distributions for attendance at a U.S. military service academy, up to the cost of advanced education. The additional tax is reported on Form 5329.
Is there a penalty for contributing too much to a Coverdell ESA?
Yes. Under IRC §4973(a) and §4973(e), a 6% excise tax applies each year to excess contributions to a Coverdell ESA. An excess contribution is the amount contributed for the year that exceeds $2,000 per beneficiary (or the lower MAGI-reduced limit), plus any prior-year excess that was not withdrawn or absorbed. The 6% excise tax is capped at 6% of the account value at year-end. The tax keeps applying every year until the excess is removed. You can avoid the 6% excise by withdrawing the excess contribution plus its net earnings before the first day of the sixth month of the following tax year (June 1 for calendar-year filers) under §530(d)(4)(C); the earnings on the returned excess are taxable in the year of the excess contribution.
Can I roll a Coverdell ESA into a 529 plan?
Yes. Under IRC §530(b)(2)(B), a contribution from a Coverdell ESA to a 529 qualified tuition program on behalf of the same beneficiary is treated as a qualified education expense, making it a tax-free transfer. This is a common move when a beneficiary approaches age 30 (the Coverdell forced-distribution age) but still has education savings to preserve, since 529 plans have no age limit on the beneficiary. The transfer must be for the same designated beneficiary. Note the reverse is not allowed: you generally cannot roll a 529 plan into a Coverdell ESA. Coverdell-to-Coverdell rollovers for the same beneficiary or a family member under age 30 are also tax-free under §530(d)(5), limited to one per 12-month period.
Did OBBBA change Coverdell ESAs for 2026?
No. The One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) expanded 529 plans (§70413 doubled the K-12 cap to $20,000 and added postsecondary credentialing) and strengthened ABLE accounts, but it did not amend IRC §530. The Coverdell ESA rules for 2026 are the same as 2025: $2,000 annual contribution limit per beneficiary, MAGI phase-out at $95,000-$110,000 single / $190,000-$220,000 joint, age-18 contribution cutoff, age-30 forced distribution, and the 10% additional tax on non-qualified distributions. Because all of these figures are statutory and not inflation-indexed, they have not changed for many years and are identical across 2025 and 2026.
What to Do Next
If You Are Below the Income Limit
Contribute up to $2,000 per beneficiary in cash by April 15. Coverdell ESAs allow self-directed investing (individual stocks, ETFs, mutual funds), unlike most 529 menus. If you also want to fund a 529, compare the two with the 529 Plan Tax Calculator and read the Coverdell ESA Guide on Coverdell vs 529.
If You Are Phased Out
The $2,000 cap is per beneficiary, not per contributor, so a grandparent or other relative under the threshold can contribute instead, or a corporation or trust can contribute with no income limit. If the income workaround does not fit, a 529 plan has no contributor income limit at all.
If You Are Taking a Distribution
Switch this calculator to distribution mode and enter your Form 1099-Q Box 1 and Box 2 figures plus your qualified expenses. Keep records of the K-12 and college expenses paid in the year - the 1099-Q does not show how much of the distribution was qualified. Reduce qualified expenses by any amount used to claim the AOTC with the Education Tax Credit Calculator.
If the Beneficiary Is Approaching 30
Avoid the forced-distribution tax. Roll the balance into a Coverdell for a younger family member, change the beneficiary to a qualifying relative under 30, or transfer the balance into a 529 plan for the same beneficiary under §530(b)(2)(B). Any of these preserves the tax-free treatment.