ESAs: One Per Year Rollover Rule Applies

ESAs: One Per Year Rollover Rule Applies

Just like IRAs, the one per year rollover rule also applies to ESAs!

Many Americans have opened Coverdell ESA accounts to pay for qualified educational expenses for a designated beneficiary. An ESA must be established and contributions made while the beneficiary is under age 18 (*unless a special needs beneficiary is involved).

ESA distributions that aren’t more than the beneficiary’s adjusted qualified education expenses for the year are tax-free.

ESA assets may be rolled over to another ESA. However, the IRS has clarified in Publication 970 that the one per year rollover rule also applies to rollovers of ESA accounts. Trustee-to-trustee transfers are still unlimited.

Source: IRS Publication 970


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