logo
  Join        Login             Stock Quote

One More Way To Save On Taxes (And Help A Child In The Process) …

 April 10, 2012 09:27 AM


Okay, we're really getting down to the wire now, with just one week left to file your taxes on time.

This year you actually have until April 17th because the 15th falls on a Sunday and the 16th is Emancipation Day, a holiday that is celebrated in Washington, D.C. But still, we're talking a matter of days left.

And yet I have one more way for you to keep additional money away from Uncle Sam while helping a kid in your life.

It's called a Coverdell ESA, and it shares a lot in common with some of the other tax shelters I've been telling you about in recent columns. Only this type of account is expressly designed to help fund a child's education.

I've been using a Coverdell for my own daughter ever since she was born five years ago … and I made my latest contribution last week for the 2011 tax year.

[Related -Initial Jobless Claims Rose Unexpectedly]

Yes, That's Right — You Can Still Fund
a Coverdell ESA and Have It Count for 2011!

Coverdell Education Savings Accounts used to be known simply as Education IRAs, and while they're not really "retirement" accounts, they DO function very much like Roth IRAs designed for young students.

In fact, like Roth IRAs, they allow you to sock away money — $2,000 a year, in this case — by tax day.

And like Roth IRAs, as long as the funds are used for the benefit of schooling costs, any returns earned in the account will be distributed free of additional taxation going forward.

While that's not an eye-popping number, it's still a nice chunk of change that will add up over the years.

[Related -All Quiet on the Record High Front]

Plus, it's perfect for using any tax refund money you might have already received if you happened to file your taxes earlier than procrastinators like me.

Meanwhile, don't underestimate the benefit of that tax shelter!

Heck, let's say you happened to put $2,000 into your child's Coverdell account and invested it so wisely that within ten years it had miraculously turned into $200,000. That full amount would be available to pay for your kid's education, and not one penny of taxes would need to be paid as you pulled it out!

Another cool feature of Coverdell accounts is that — unlike ever-popular 529 Plans — they can be used for expenses related to ALL types of schooling: High-priced pre-K classes, private secondary education, and even many associated costs such as computers and books.

Originally both this feature — and the $2,000 annual contribution limit — were going to change. But last year's tax package kept both items intact through 2012 … which is great news.


Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.