Who can contribute and how much? Almost anyone can contribute to an Educational IRA. Here are a few details about annual contributions.
Each child can receive a total of $2,000 per year in contributions from all sources. It does not make a difference if this is done in a single account or multiple accounts designed to benefit the same child. The deadline to make the annual contribution is April 15th.
A person may be limited in the amount of their contribution if their modified adjusted gross income exceeds $95,000 for single filers or $190,000 for joint filers. Above these income levels, the ability to contribute is phased out. If income exceeds $110,000 for single filers or $220,000 for joint filers, no contribution is allowed.
An “entity” (i.e. a corporation or a tax-exempt organization) may also contribute to an Educational IRA and there are no income level limitations.
Contributions to an Educational IRA and a qualified state tuition program can be made in the same year on behalf of the same beneficiary without penalty.
Should you contribute more than the annual $2,000 per year, you may incur a 6% penalty. However, you may avoid the penalty if you take a distribution of the excess amount plus earnings before the first day of the 6th month following the taxable year.
