Coverdell limit for husband and wife filing joint tax

[kingstar]

My wife and I file our taxes jointly. We would like to contribute to Coverdell Education Savings Accounts for our kids. Because of our joint income, the maximum that we can contribute is less than $2000. I was wondering if both of us can individually contribute to the same child's account. To make it more specific, let's say our MAGI is $205000, which means the max we can contribute according to IRS formula is $1000. Can we each contribute $1000? I asked a financial advisor and he told me to consult a tax professional but he said "my guess is that a married couple who files jointly would count as one eligible contributor." This does not make too much sense to me because if we had filed our taxes separately, this would be a non-issue since both of our would have our own separate limits and we would be able to make the full $2000 allowed contribution to the child's account.

[PattiF]

As long as your MAGI  is less than $190,000 for married filing jointly you are able to make a contribution of $2000 to the Coverdell ESA. Since your AGI is $205,000 the limit is less than $2000 in total. You are not able to make a contribution of $2000. There is also a phaseout on the contribution for filing as single.

Please see this from the IRS Tax Tip.

This worksheet from the IRS will let you know the amount that you can contribute as Married Filing Joint and with the filing status of single.

[kingstar]

Thank you, I appreciate your response.

May I ask what the basis is for your reasoning? My confusion stems from the fact that if we had filed as single and each had half the income as in the example (e.g. 205K/2= 102.5K), our individual limits would be both $1000 and we could each contribute $1000, adding up to $2000. This is because the phaseout limits are half of the joint limits (i.e. , 190K/2= 95K and 220K/2 = 110K).  In fact, in any different combination of income between husband and wife, the total allowed contribution would end up $2000. Let's say husband earns $120K, and wife earns (205-120 = 85K), husband can't contribute anything but wife can contribute the full $2000.

Given this, I don't understand why a couple filing jointly can't each contribute to their calculated max amount.

[PattiF]

From Forbes:

 

Income Phaseouts

There are several different income phaseouts for education tax benefits.

2022 Income Phaseouts for Education Tax Benefits

MARK KANTROWITZ

@kingstar