An Education IRA allows you to save funds for education costs.

Benefits:

• Deposits and earnings may be withdrawn tax and penalty free if used to pay for higher education costs.
• May also be used to pay for qualified expenses of K-12 education in public, private, and/or religious schools.
• Funds grow free of taxes
• Contribution limits rose from $500 to $2,000 per year in 2002

• An account may be established for anyone under 18 years old. Once the beneficiary reaches 18, no further funds can be contributed

• Contributions are limited to $2,000 per year
• While anyone may contribute to the account, the contributions are not tax deductible, and contributions may only be made by taxpayers falling under gross income limits

• Distributions used for anything other than education expenses are treated as income and subject to taxes and penalties
• If beneficiary reaches 30 years old and the fund is still available the money must be distributed or rolled into another family member's account