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Can you explain the education IRA?

education ira

education ira

New York - The Education IRA is a separate IRA account for a named beneficiary to save for higher education. This account is funded by non-tax deductible contributions.

Earnings of this account are subject to inclusion in gross income and an additional 10% tax upon distribution should it exceed qualified higher education expenses. The following are other key characteristics:

  • Contributions of up to $500 annually are allowed which is in addition to the $2,000 regular IRA limit.

  • Contributions may be made regardless of whether the beneficiary has gross income

  • Contributions may not be made after the beneficiary has reached 18

  • Income limitations for contributions begin at $150,000 for married taxpayers filing jointly and $95,000 for single taxpayers.

The key benefit of the account is the tax-deferred aspect of the earnings whether capital gains or dividends until the year of distribution.

An independent Fee-Only financial adviser can help you determine the most appropriate IRA strategy. 


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