University of Illinois Extension

Eligibility and Limitations

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Table 1: Income, Contribution and Benefit Limits

  Coverdell
Education Savings Account
Qualified Tuition Programs Savings Bond Interest Deduction American Opportunity (Hope) Credit Lifetime Learning Credit Employer-Provided Assistance Early Distribution
from IRAs
Student Loan Interest Deduction
Income range over which eligibility is phased out Modified AGI1
2013: $95 - $110,000 (single),$190 - $220,000 (joint)
None Modified AGI1
2013: $74,700 -$89,700 (single), $112,050 -$142,050 (joint) (indexed for inflation)
Modified AGI1
2013: $80 - $90,000 (single), $160 -$180,000 (joint)
(indexed for inflation)
Modified AGI1
2013: $53 -$63,000 (single), $107 -$127,000 (joint) (indexed for inflation)
None None Modified AGI1
2013: $60 - $75,000 (single), $125 - $155,000 (joint)
(indexed for inflation)
Annual limits Contributions: per beneficiary:
$2000 by April 15 of following year.
Distributions: amount of qualified expenses.
Contributions: None. But check for gift tax issues.
Total cannot exceed the amount needed to cover qualified expenses.
Distributions: amount of qualified expenses.
Up to amount of qualified expenses Through 2017: $2500 per student.
2018: $1800 per student (indexed for inflation)
$2500 per tax return $5250 Up to amount of qualified expenses $2500

 

Table 2: Types of Education Programs Covered

  Coverdell Education Savings Account Qualified Tuition Programs Savings Bond Interest Deduction American Opportunity (Hope) Credit Lifetime Learning Credit Employer-Provided Assistance Early Distribution
from IRAs
Student Loan Interest Deduction
Undergraduate Yes Yes Yes Yes. Through 2017: first four years only 2018: first two years only Yes Yes Yes Yes
Graduate Yes Yes Yes No Yes Yes Yes Yes
Other qualifying education Elementary and secondary school Classes for a recognized credential appear to qualify, as vocational schools are listed as eligible institutions. Classes to improve or acquire job skills apparently do not qualify. Certificate programs (IRS Publication 970, p. 82) Certificate or other recognized credential at an eligible educational institution (IRS Publication 970, p. 81) Any, as long as enrolled at an eligible educational institution. Includes classes to acquire or improve job skills. No No Certificate or other recognized credential at an eligible educational institution (IRS Publication 970, p. 82)

 

Table 3: What Expenses Are Allowable?

  Coverdell Education Savings Account Qualified Tuition Programs Savings Bond Interest Deduction American Opportunity (Hope) Credit Lifetime Learning Credit Employer-Provided Assistance Early Distribution
from IRAs
Student Loan Interest Deduction
Tuition and fees Yes Yes Yes Yes Yes Yes Yes Yes
Books Yes, and supplies Yes No 2012: Yes 2013: No. No Yes. Also supplies and equipment except those that can be retained after course ends. Yes, and supplies Yes
Room and board Yes, if half-time2 or more Yes, if half-time2 or more No No No No Yes, if half-time2 or more Yes
Computer technology, equipment, Internet service No Computer purchase allowed only if required by the institution. No No No No No No

 

Table 4: Requirements for Student And Institution

  Coverdell Education Savings Account Qualified Tuition Programs Savings Bond Interest Deduction American Opportunity (Hope) Credit Lifetime Learning Credit Employer-Provided Assistance Early Distribution
from IRAs
Student Loan Interest Deduction
Eligible institution required? Yes3 Yes3 Yes3 Yes3 Yes3 No Yes3 Yes3
% time required NA except half-time4 for room and board NA except half-time4 for room and board NA Half-time4 Enrolled in at least one course NA NA except half-time4 for room and board Half-time4
Other student requirements       No federal or state convictions for possessing or distributions controlled substances        

 

Table 5: Additional Requirements and Limitations

  Coverdell Education Savings Account Qualified Tuition Programs Savings Bond Interest Deduction American Opportunity (Hope) Credit Lifetime Learning Credit Employer-Provided Assistance Early Distribution
from IRAs
Student Loan Interest Deduction
# times can claim No limit to number of years can contribute or take distributions No limit to number of years can contribute or take distributions No limit Through 2017: four years per student
2018: two years per student.
No limit No limit No limit No limit
Whose expenses are eligible? Only the beneficiary named on the account. The beneficiary can be changed to another member of the original beneficiary's family by rolling over to another ESA or changing the beneficiary on the existing account. Only the beneficiary named on the account. The beneficiary can be changed to another member of the original beneficiary's family by rolling over to another plan or changing the beneficiary on the existing account. Taxpayer, spouse, or dependent Taxpayer, spouse, or dependent Taxpayer, spouse, or dependent Employee Taxpayer, spouse, child, or grandchild Taxpayer, spouse, or any dependent of taxpayer as of time the debt was incurred
Who reports or claims the deduction/credit/ income? Contributions are not reported to the IRS.
Non-taxable distributions are not reported.
Taxable distributions are reported by and taxable to the beneficiary.
Contributions are not reported.
Taxable distributions are reported by and taxable to the beneficiary.
Bond owner (or co-owner with spouse) who pays expenses for self, spouse, or dependent Parent, if the student is a dependent. Otherwise, the student claims.
Expenses paid by a dependent are treated as paid by the parent.
Parent, if the student is a dependent. Otherwise, the student claims.
Expenses paid by a dependent are treated as paid by the parent.
Employee reports income if benefits are greater than $5250. IRA account owner reports income. The person who paid the interest and is legally obligated to do so. But if that person is claimed as a dependent by another, no one can claim the deduction.
Payments made by someone else on your behalf are treated as paid by you.
Married couples must file jointly? No No Yes Yes Yes No No Yes
Age limit Contributions: before beneficiary reaches age 18.
Distributions: within 30 days after beneficiary reaches age 30
None.
Check whether individual plans have limits.
Bond owner must be at least 24 years of age before bond issue date (first day of month in which purchased). None None None NA. However, after age 59½, there is no early distribution penalty regardless of the use of the proceeds. None

 


  1. For the Savings Bond Interest Deduction only, Modified Adjusted Gross Income (MAGI) adds back deductions for student loan interest, tuition and fees (extended through 2013), or domestic production activities; and exclusions for employer adoption assistance. For other tax breaks, most taxpayers' MAGI is the same as AGI from Form 1040, line 38. See Tax Benefits for Education, IRS Publication 970 (http://www.irs.gov/formspubs).
  2. Student must take at least one-half the normal full-time course load for the course of study being pursued.
  3. Eligible institutions include any college, university, vocational school, or other post-secondary institution educational institutions eligible to participate in the federal student loan program, but may include others. See the Glossary in IRS Publication 970 (http://www.irs.gov/formspubs) for details.
  4. Student must take at least one-half the normal full-time course load for the course of study being pursued. For the American Opportunity Credit only, at least half time for at least one academic period beginning during the tax year.