You do not need earned income to contribute to an education savings account (ESA), and the contributor can be any individual, including the designated beneficiary of the account. As opposed to many 529 Plans, contributions are discretionary, meaning that you are not required to make deposits every year.
A self-directed Coverdell education savings account with Advanta IRA provides you the ability to grow money and gain wealth on a tax-free basis for your child’s education. By self-directing the funds in an educational account into non-traditional investments that you know, such as real estate, notes, and partnerships, you may grow the wealth in the account faster than through traditional investments.
Contributions to a self-directed Coverdell ESA are not tax deductible. However, the earnings are tax free, assuming the contribution is less than the account holder’s annual adjusted, qualified education expenses. In the event that the distributions are higher than the expenses, the gains are taxed at the account holder’s rate rather than the contributor’s rate (which is typically higher).
Choose a self-directed Coverdell with Advanta IRA account if:
Contributions to an education savings account:
|ESA (education savings account)||$2,000 per year, per child||$2,000 per year, per child|