Families may contribute $2000 per year to a special Education Savings Account (ESA) IRA for each child up to age 18. Contributions are nondeductible; but interest, dividends, and capital gains accumulate tax-free until the student reaches age 30. At that time, the funds must be withdrawn and are free of taxes and penalties if used for higher-education expenses. Or they can be transferred to an education IRA for a qualified family member. Contributions are phased out if the contributor's income is $95,000 - $110,000 (single), or $190,000 - $220,000 (joint). |