Hi gracemg,
In general, the designated beneficiary of a Coverdell ESA can receive tax-free distributions to pay qualified education expenses. The distributions are tax-free to the extent the amount of the distributions doesn't exceed the beneficiary's qualified education expenses. If a distribution exceeds the beneficiary's qualified education expenses, a portion of the earnings is taxable to the beneficiary. Amounts remaining in the account must be distributed within 30 days after the designated beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary.
If there is a balance in the Coverdell ESA at the time the beneficiary reaches
30 years old, it must be distributed within 30 days. A portion representing earnings
on the account will be taxable and subject to a 10% penalty.
The beneficiary may
avoid this tax and penalty by rolling over the full balance to another Coverdell ESA
for another family member.
If you do take distribution before 30 years of age and do not use on education, then distribution will be taxed at same rate as your ordinary income.
Here is link to help figure your tax bracket:
Tax Bracket Calculator
Hope this helps. Thank you for asking.
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