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Tax-advantaged savings for education

Help your children or grandchildren get a head start on higher education with a Coverdell Education Savings Account (CESA) from BMO Harris Financial Advisors. Similar to an Individual Retirement Account, a CESA is a tax-deferred savings vehicle that helps you set aside money specifically for college tuition and other education expenses.

There are contribution limits based on the contributor's income. See if you're eligible to make a full or partial contribution.

Features and benefits

  • Distributions are tax-free as long as you use them for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board.
  • There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law.
  • Eligible institutions also include any college, university, vocational school or other post-secondary educational institution eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) post-secondary institutions are eligible.

Other investment considerations

  • If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.
  • If there is a balance in the Coverdell ESA when the beneficiary reaches age 30, generally you must take a distribution within 30 days. The portion representing earnings will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to a Coverdell ESA for another family member.
Coverdell Education Savings Account (CESA) Eligibility
MAGI* for Single or
Head of Household
MAGI* for Married
Filing Jointly
Full Up to $95,000 Up to $190,000
Partial $95,000 – $109,999 $190,000 – $219,999
None $110,000 or more $220,000 or more
*Modified Adjusted Gross Income

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