ARTICLE TAKEAWAYS
Generally, qualified education expenses are those required for the enrollment or attendance of the beneficiary at an eligible educational institution. The Coverdell ESA authorized person or recipient is responsible for confirming an education expense is considered qualified and should review About Publication 970, Tax Benefits for Education to see what the Internal Revenue Service (IRS) considers qualified. For higher education expenses, visit the Federal Student Aid website and use the Federal School Code Search to verify the school is an eligible educational institution by confirming it has a federal school code.
If distributions are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty, in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of distributions. Your client should consult with a tax advisor for state-specific details.
The following expenses are generally considered qualified for elementary, secondary or higher education institutions:
* Must be used primarily by the recipient during the time enrolled at the eligible higher educational institution
For financial professionals only. Not for use with the public.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
The guidelines and procedures provided in the Account Resource Center may not apply to networked accounts or accounts not directly held by American Funds. The guidelines and procedures provided also apply only to those retirement accounts or Coverdell ESAs invested in American Funds with Capital Bank and Trust Company (CB&T) as custodian. The guidelines and procedures provided in the Account Resource Center do not apply to plans held in our retirement plan solutions — PlanPremier, PlanPremier-TPA or RecordkeeperDirect. Information on the Account Resource Center may change periodically, and previously printed information may not be current. Please refer to capitalgroup.com for the most current information available.
Financial professionals should always contact their back office to determine if there are any restrictions on the use of American Funds products, tools, services, websites and literature.