Coverdell Education Savings Account (ESA) — What Is a Coverdell ESA?: Education Tax Benefits (2025 IRS Guide)

This guide covers “Coverdell Education Savings Account (ESA) — What Is a Coverdell ESA?” within education tax benefits. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 970 (2025), Tax Benefits for Education, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Coverdell Education Savings Account (ESA) — What Is a Coverdell ESA?

A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account.

When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary.

To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created.

The document creating and governing the account must be in writing and must satisfy the following requirements.

1. The trustee or custodian must be a bank or an entity approved by the IRS.

2. The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions.

   1. The contribution is in cash.

   2. The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary.

   3. The contribution wouldn’t result in total contributions for the year (not including rollover contributions) being more than $2,000.

3. Money in the account can’t be invested in life insurance contracts.

4. Money in the account can’t be combined with other property except in a common trust fund or common investment fund.

5. The balance in the account must generally be distributed within 30 days after the earlier of the following events.

   1. The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary.

   2. The beneficiary’s death.

Qualified Education Expenses

Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. The expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses.

Designated beneficiary.

This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account.

Contributions to a qualified tuition program (QTP).

A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. See chapter 7.

Eligible Educational Institution

An eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school.

Eligible postsecondary school.

An eligible postsecondary school is generally any accredited public, nonprofit, or proprietary (privately owned profit-making) college, university, vocational school, or other postsecondary educational institution. Also, the institution must be eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited postsecondary institutions meet this definition. The educational institution should be able to tell you if it is an eligible educational institution.

An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program administered by the U.S. Department of Education.

Eligible elementary or secondary school.

An eligible elementary or secondary school is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law.

Qualified Higher Education Expenses

These are expenses related to enrollment or attendance at an eligible postsecondary school. As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time.

1. The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school.

   1. Tuition and fees.

   2. Books, supplies, and equipment.

2. Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school.

3. Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below).

   The expense for room and board qualifies only to the extent that it isn’t more than the greater of the following two amounts.

   1. The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.

   2. The actual amount charged if the student is residing in housing owned or operated by the school.

   You may need to contact the eligible educational institution for qualified room and board costs.

4. The purchase of computer or peripheral equipment, computer software, or Internet access and related services if it is to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible postsecondary school. (This doesn’t include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.)

Half-time student.

A student is enrolled “at least half-time” if they are enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.

Qualified Elementary and Secondary Education Expenses

These are expenses related to enrollment or attendance at an eligible elementary or secondary school. As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. There are special rules for computer-related expenses.

1. The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school.

   1. Tuition and fees.

   2. Books, supplies, and equipment.

   3. Academic tutoring.

   4. Special needs services for a special needs beneficiary.

2. The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school.

   1. Room and board.

   2. Uniforms.

   3. Transportation.

   4. Supplementary items and services (including extended day programs).

3. The purchase of computer or peripheral equipment, computer software, fiber optic cables related to computer use, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary’s family during any of the years the beneficiary is in elementary or secondary school. (This doesn’t include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature.)

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 970 (2025), Tax Benefits for Education: Coverdell Education Savings Account (ESA) — What Is a Coverdell ESA? — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.