Education IRA's

"Education IRA's" submitted by SchoolGrantsfor Editorial Team and last updated on Friday 27th May 2011

Qualified taxpayers will be able to establish Education IRAs and contribute up to $500 nondeductible per calendar year for each designated beneficiary under age 18. The beneficiary need not be your dependent child.

IRA withdrawals are tax-free and penalty-free, as long as the money is used for qualified education expenses. The Education IRA contribution maximum of $500 per year is in addition to the current $2,000 annual standard or Roth IRA contribution amount. You may not contribute to an Education IRA if, during the same tax year, you have made contributions to a qualified state pre-paid tuition program for the same beneficiary.

Education IRA's are available for individuals with modified AGI under $95,000 and is phased out between $95,000 and $110,000. The Education IRA is available for joint filers with modified AGI under $150,000 and is phased out between $150,000 and $160,000.

You may begin making contributions to Education IRAs for tax years beginning January 1, 1998. You cannot combine the Education IRA with the Hope Scholarship Credit or Lifetime Learning Tax Credit in the same year for the same child.