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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)
  • Anyone under age 70½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)
  • 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)
  • 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
  • $5,000 for 2012
  • Higher limit if age 50 or older
  • Can not exceed compensation
  • Reduced by contributions to traditional IRAs
  • $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.
  • Who can make contributions?
  • No one can deduct contributions
  • 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
  • No one can deduct contributions
  • 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  • Regular contributions can be withdrawn tax- and penalty-free at any time.
  • After the account has been open five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons: are 59½, disability, death, or a first time home purchase ***
  • Earnings grow tax-deferred until withdrawn
  • Contributions may be tax-deductible
  • 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.
  • 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.
  • 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
  • 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
  • Not intended as tax advice. Please consult a tax professional.
    * MAGI – modified adjusted gross income from the federal tax form.
    ** For tax year 2001.
    *** Lifetime limit for exemptions for first-time home purchase is $10,000.


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