Account Types
Which statement about Coverdell Education Savings Accounts (ESAs) is TRUE?
Coverdell: income phaseouts exist, not deductible, K-12 and college eligible.
Complete Analysis & Legal Rationale
Coverdell ESA contributions are subject to income phaseouts. For single filers, the phaseout begins at $95,000 MAGI; for joint filers at $190,000. High-income earners may be ineligible to contribute directly.
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 tax-deductible.
There ARE income limits that phase out contribution eligibility.
Matches the verified teaching point in the explanation.
Coverdell funds can be used for K-12 AND college qualified expenses.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.