Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Other Income, Form 1040 Line 21

Other Income

Coverdell ESA

Coverdell Educational Savings Accounts (ESAs) and Qualified Tuition Programs (QTPs), also called "section 529 plans," are accounts that help individuals save for the cost of elementary, high school or higher education. Generally, an individual can establish a Coverdell ESA for a child who is under age 18.

Coverdell ESAs (section 530 plans) and QTPs include the following provisions:

  • Money is contributed to a special account
  • Contributions are not deductible
  • Earnings amounts deposited into the account grow tax-free until distributed

No tax is due on distributions if the beneficiary had qualified education expenses that were at least as much as the distributions during the year.

Be sure to note that the definition of qualified education expenses is different for the various education benefits. Qualified education expenses for ESAs and QTPs are summarized in Appendix B in the back of Publication 970. The details are outlined in the text of that publication.

Tip

Ask taxpayers questions to determine if they are using the funds for qualified education expenses.

Form 5498-ESA, Coverdell ESA contribution information.