Home > Glossary > Education Savings Account (ESA)

Meaning / Definition of

Education Savings Account (ESA)

Categories: Finance,

You can put up to $2,000 a year into a coverdell education savings account (ESA) that you establish in the name of a minor child. The assets in the account can be invested any way you choose.There is no limit on the number of accounts you can set up for different beneficiaries, but no more than a total of $2,000 can be contributed in a single beneficiary's name in any one year. If you choose, you may switch the beneficiary of an ESA to another member of the same extended family.Your contribution is not tax deductible. But any earnings that accumulate in the account can be withdrawn tax free if they're used to pay qualified educational expenses for the beneficiary until he or she reaches age 30. The costs can be incurred at any level, from elementary school through a graduate degree, or at a qualified post-secondary technical or vocational school. There are no restrictions on using ESA money in the same year the student uses other tax-free savings, or the student, parent, or guardian uses tax credits for educational expenses. But you can't take a credit for expenses you covered with tax-free withdrawals.To qualify to make a full $2,000 contribution to an ESA, your modified adjusted gross income (MAGI) must be $95,000 or less, and your right to make any contribution at all is phased out if your MAGI is $110,000 if you're a single taxpayer. The comparable range if you're married and file a joint return is $190,000, phased out at $220,000.

Featured term of the day

Definition / Meaning of

Return

Categories: Tax, Investing and Trading, Bonds and Treasuries, Accounting, Stocks,

Your return is the profit or loss you have on your investments, including income and change in value. Return can be expressed as a percentage and is calculated by adding the income and the change in value and then dividing by the initial principal or investment amount. You can find the annualized return by dividing the percentage return by the number of years you have held the investment. For example, if you bought a stock that paid no dividends at $25 a share and sold it for $30 a share, your return would be $5. If you bought on January 3, and sold it the following January 4, that would be a 20% annual percentage return, or the $5 return divided by your $25 investment. But if you held the stock for five years before selling for $30 a share, your annualized return would be 4%, because the 20% gain is divided by five years rather than one year.Percentage return and annual percentage return allow you to compare the return provided by different investments or investments you have held for different periods of time.

Most popular terms

1. Earnings Before Interest, Taxes, Depreciation And Amortization
2. Hybrid Mortgage
3. Health Savings Account (HSA)
4. Loss Payable Clause
5. Mortgage (mortgagee) Clause
6. Life Settlement
7. Weighted Stock Index
8. Broad-base Index
9. Personal Profit Exclusion
10. ConsensusDOCS

Search a term

Keyword:

Browse by alphabet

ABCDEFG
HIJKLMN
OPQRSTU
VWXYZ#

Browse by category

Accounting
Banking
Bankruptcy Assistance
Bonds and Treasuries
Brokerages
Business and Management
Compliance and Governance
Credit and Debt
E-commerce
Economics
Estate Planning
Forex
Fraud
Fundamental Analysis
Futures
Global
Insurance
International Trade
Investing and Trading
Ipos
Legal
Loan and Mortgage
Mergers and Acquisitions
Mutual Funds
Operation and Production
Options
Patent
Personnel Management
Real Estate
Retirement and Pension
Statistics and Risk Management
Stocks
Strategies
Tax
Technical Analysis
Venture Capital