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Tax-Free Savings for Precollege Education Expenses

With a Coverdell education savings account, you can take tax-free withdrawals for a primary or secondary student if you use them for qualified expenses.

My daughter is just starting the 10th grade, and I have a Coverdell education savings account for her. I understand that even though she’s still in high school, I can tap the account tax-free for certain expenses. Which ones qualify?

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You can use the money in your Coverdell for a number of educational expenses for private or public school. Unlike 529 college-savings plans, Coverdell education savings accounts can be used tax-free for college costs as well as many expenses for primary and secondary education (kindergarten through high school).

Some of the expenses have to be required by the school to be eligible; others do not, says Rande Spiegelman, vice-president of financial planning at Charles Schwab. You can use the money for fees, books, supplies, equipment and academic tutoring, whether or not they are required by the primary or secondary school. Special-needs beneficiaries can also use the money for certain services. Computers, equipment and Internet access for educational purposes can qualify, too. You can also use the money for room and board, uniforms, transportation or other supplementary services (such as extended-day programs) but only if they are required or provided by the school. (See IRS Publication 970, Tax Benefits for Education, for more about eligible expenses.)

To qualify to make Coverdell ESA contributions in 2014, your modified adjusted gross income must be less than $110,000 if you’re single or $220,000 if married filing jointly. For more information about Coverdell ESAs, see Another Way to Save for Education. For a list of brokerages and fund companies that offer low-cost ESAs, see

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