Does anyone know about Coverdell/ESA accounts?

[LoveBWVVBR]

I opened a Vanguard Coverdell savings account (now called an Education Savings Plan I think?) when my oldest was around a year old. I only ever put the 2K that I was allowed to put in that one year and never added to it.

Anyways, we have the full Florida Prepaid tuition plan plus a very decent 529 for her now so I wanted to use the ESA to pay for her Kindergarten tuition at a private school next year. It looks like the law for using this type of acct. to pay for private school is about to change, though?? I am really confused. Will I still be able to use it for her school tuition next year or do I need to do something before the end of this year? I *think* that her school would allow me to prepay for next year's tuition now if I asked them. Can I use the funds this way? Thank you if you are an expert in this. I really regret even opening this account. It was such a limited savings option...grrrr.

 

[LoveBWVVBR]

UGH, I just looked at her acct. online and it's down to only $1745.xx. I really don't want to cash it out now since it's lost money. Grrrrrrr.

 

[allyphoe]

Because the account has no earnings (is worth less than what you originally put in), you can take the money out with no tax consequence, regardless of what you use it for.

The loss is a misc 2% deduction on Schedule A, which probably will get you no tax benefit, but you never know.

 

[LoveBWVVBR]

Because the account has no earnings (is worth less than what you originally put in), you can take the money out with no tax consequence, regardless of what you use it for.

The loss is a misc 2% deduction on Schedule A, which probably will get you no tax benefit, but you never know.

Thanks for the info! I doubt that I will end up taking it out, knowing that it has lost over $200 since I put it in. I'll keep an eye on it and take it out before it hits $2000, though. I sure wish that I'd never made that "investment"

 

[deva]

You can roll the Coverdell into your 529 plan tax-free (even if it is appreciated, although yours is now depreciated). One less account to track - and then it can grow with your other 529 assets.