Coverdell ESAs can offer investors a much broader range of investment options when compared to state run 529 plans.

Using the IRS phase-out formulas, if a married couple earns $200,000, they can only contribute $1,300 to each child's Coverdell ESA. (The IRS prorates the contribution amounts, based on where the income falls in the phase-out range – if it's right in the middle, for instance, you could only contribute 50 percent of the maximum or $1,000). However, contribution rules work similarly to those of a 401(k) plan. The maximum total amount that a beneficiary may annually receive in the form of Coverdell ESA monies is $2,000. But if your child doesn’t go to college by the time he or she turns 18, you can roll over your Coverdell ESA balance into a 529 plan for that beneficiary. So you can technically make your annual contribution up to the tax deadline of the following year. Individuals may contribute to any number of accounts per tax year as long as each plan does not exceed the $2,000 contribution limit.

If that same child somehow earns $97,000, then the total contributions to his or her Coverdell ESA cannot exceed $1,734 a year. Coverdell Education Savings Account (ESA) Grandparents who open a Coverdell ESA can contribute up to $2,000 per year.

How Much Can I Contribute to an ESA? Coverdell ESA Contribution Limits and Rules. The ability to contribute to a Coverdell ESA is phased out for single filers with Modified Adjusted Gross Income (MAGI) between $95,000 and $110,000 and for joint filers with MAGI between $190,000 and $220,000.

There is no limit on the number of Coverdell ESAs that a beneficiary may hold. While the annual contributions are almost limitless for 529 plans, Coverdell's contributions are limited to $2,000. If you have three eligible children you can contribute $2,000 for each of them. How Much Can You Contribute To A Coverdell Account? If that same child somehow earns $97,000, then the total contributions to his or her Coverdell ESA cannot exceed $1,734 a year. If multiple ESAs are set up for the benefit of only one child, the total of all contributions can not exceed $2,000. Each ESA plan can only receive a total of $2,000 in contributions per tax year. These non-deductible contributions must be made in cash, but will grow through tax-deferment, and may be withdrawn tax-free for qualified educational expenses. These costs can include school uniforms, computers, and transportation for elementary or secondary school, public, private or religious.

With the new Coverdell ESA (formerly known as the Education IRA) your contributions can grow tax-deferred and distributed income tax-free as long as distributions are used for qualified education expenses. The annual contribution limit for a Coverdell ESA is $2,000. Besides the $2,000 annual limit on how much you can contribute for a particular child, there is also an overall $2,000 annual limit on contributions to ESAs for the benefit of that particular child. How Much Can You Contribute To A Coverdell Account?

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