eet a certain amount of criteria. First, the contribution is designated for a child who is under the age of 18. Second, no state pre-paid tuition contribution is made during the same year that an Education IRA is made. Third, individual with earned income who is making the contribution is subject to AGI limits; however, earned income is not required. Fourth, single individuals with AGI of $95,000 or less may contribute to an Education IRA. Partial contributions are available for those earning between $95,000 and $160,000. And last, married individuals filing jointly with AGI of $150,000 or less may contribute to an Education IRA. Partial contributions are available for those earning between $150,000 and $160,000.With the Education IRA the amounts being deposited in the account grow tax-free until distributed, and the child will not owe tax on any withdrawal from the account if the child’s qualified higher education expenses at an eligible education institution for the year equal or exceed the amount of the withdrawal (DJI webcenter, what’s hot, 2000). With the Education IRA any withdrawals that exceed the intended child’s qualified higher education expenses in a taxable year will be subject to income tax and a 10% penalty. One of the great benefits of the Education IRA is the fact that if the intended user of the Education IRA does not use it, then the IRA account balance can be rolled over to an Education IRA of another family member who can use it. When the Education IRA is rolled over to the other family member, that family member must be under the age of 18 and must use that Education IRA before the age of 30 or the funds will be liquidated. In case for some reason you contribute more than $500 to an Education IRA on behalf of a child in a calendar year. The contributions will be treated as excess contributions and will be subject to a 6 percent excise tax for each year the excess amount remains in the ...
