Qualified Coverdell Education Account Expenses

If a beneficiary's "qualified education expenses" in a year equal or exceed total education IRA distributions for the year, the distributions are 100% excluded from the beneficiary's gross income. Prior to 2002, "qualified education expenses" were limited to expenses for higher education and generally included tuition, fees, books, supplies, equipment and certain room and board expenses. The 2001 Act altered the definition of qualified expenses to include elementary and secondary school expenses. The term school for this definition includes any school that provides elementary or secondary education (Kindergarten through Grade 12 as determined under state law).

"Qualified elementary and secondary education expenses" are defined as:

(a) Expenses for tuition, fees, academic tutoring, special needs services in the case of a "special needs beneficiary" books, supplies, and other equipment which are incurred in connection with the enrollment or attendance of the designated beneficiary of an education IRA's trust as an elementary or secondary school student at a public, private, or religious school.

(b) Expenses for room and board, uniforms, transportation, and supplementary items and services (including extended day programs) which are required or provided by a public, private, or religious school in connection with the enrollment or attendance of the designated beneficiary at the school.

(c) Expenses for the purchase of any computer technology or equipment or for Internet access and related services if the technology, equipment, or services are to be used by the beneficiary and the beneficiary's family during any of the years that the beneficiary is in school. This will not include expenses for computer software designed for sports, games or hobbies unless the software is educational in nature.

Distribution Requirements for Coverdell Accounts

return to Coverdell Education Accounts

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