Savings On Education Expenses

Got Kids?

Want to help them pay for college?

Want to survive those tuition bills?

This post will help you learn about the Coverdell Education Savings Account (CESA). But first, understand that with this type of account, it doesn’t just have to be for college. You could be like a client of mine who is considering a Kindergarten program for their now two year old in NYC, that cost more than her 4 years of college.

A CESA can be used to pay for qualifying expenses for a student from Kindergarten through College. Additionally, the beneficiary (Student) does not have to be your child. You can help fund a grand-child, niece, nephew, even a friend.

So, 40 percent? The typical real estate investor has approximately a 28% tax bracket, and when doing a short term flip, may also be paying a 15% capital gain tax. Using strategies to be discussed, one could ultimately save more than 40% on taxes by using a Coverdell Education Savings Account.

Basic Introduction to a Coverdell Education Savings Account

The Coverdell ESA was originally designed by U.S. Senator Paul Coverdell (R-Ga). The Coverdell account, on the surface, appears to be very similar to the more well-known 529 Plan for education savings. However, a major distinct advantage is the allowance of investments in real estate, as well as many other investment vehicles. There are other advantages to the Coverdell account to be discussed later.

Here are some major highlights of the Coverdell Education Savings Account (CESA):

  • Investments into the account are not tax-exempt. These funds are invested post-income tax.
  • Investments into the account grow tax free*.
  • In the big picture, a CESA is like a self-directed Roth IRA
  • Withdraws are made to fund education expenses including …read more