Will Congress Sit By and Limit the Uses of Your Education Savings Account?
Maybe you have heard of Coverdell Education Savings Accounts. Maybe you even have one for your kids. They were created by Congress in 2001 as a way to save $2,000 per year per child for qualified education expenses tax-free. It’s a good way for parents to save money to cover some K-12 private school tuition expenses, or school supplies, or even to provide some savings for a college education.
But it appears, according to the Heritage Foundation’s Patrick Tyrrell, that Congress — by doing nothing — soon may limit what you can use your Coverdell ESA money for:
If Congress fails to act, parents will no longer be able to use the tax-deferred savings they have accumulated for pre-college expenses. If this happens, then expiration will violate President Obama’s pledge not to raise taxes on people making less than $250,000 a year because, as it stands, Coverdell accounts are exempt from capital gains taxes when used for primary or secondary expenses such as private school tuition, a new computer, or school supplies.
The extra revenue brought into the federal government by prohibiting Coverdells from being used for all educational expenses is miniscule; but to prohibit it, to change the rules of the game after savers have been investing their $2,000 Coverdell contributions per year tax-free for up to ten years, is unreasonable and unfair. Perhaps members of Congress have such an ax to grind against the American people sending their children to private schools that they will allow the rules regarding Coverdell accounts to be altered, but that would be a big mistake.
So I guess we’ll see if Congress has it in not only for poor families who want to send their kids to private schools yet can’t afford to, but also for middle class families who want to save money to send their kids to private schools. At least that would be a mark of some kind of consistency. Shameful, yes. But definitely consistent.