Education IRAs

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Education IRAs

Education IRA Contributions At a Glance

Question Answer
What is an education IRA? An IRA that is set up to pay the qualified higher education expenses of a designated beneficiary.

Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers education IRAs.

Who can an education IRA be set up for? Any child who is under age 18.

Who can contribute to an education IRA? Generally, and individual (including the beneficiary) whose modified adjusted gross income for the year is not more that $110,000 ($220,000 in the case of a joint return).

Are contributions deductible? No.

Why should someone contribute to an education IRA? Earnings on the account grow tax free until withdrawn.

What is the contribution limit? Up to $2,000 each year for each child.

What if more than one education IRA has been opened for the same child? The annual contribution limit is $2,000 for each child, no matter how many education IRAs are set up for that child.

Can contributions other than cash be contributed to an education IRA? No.

When must contributions stop? No contributions can be made to a child's education IRA after he or she reached age 18, except for certain special needs children.