Account Types
Contributions to a Coverdell Education Savings Account are:
Coverdell: contributions NOT deductible. Growth and qualified withdrawals = tax-free.
Complete Analysis & Legal Rationale
Coverdell ESA contributions are made with after-tax dollars (not tax-deductible). However, earnings grow tax-free, and withdrawals for qualified education expenses are tax-free.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Coverdell contributions are not federally deductible.
State deductibility varies, but federal treatment is not deductible.
Matches the verified teaching point in the explanation.
The $2,000 is the contribution limit, not a deduction amount.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.