An Education IRA (EIRA) is an IRA established to provide funds that will allow a beneficiary to attend a program of higher education. There is no tax deduction allowed for the contribution, but all deposits and earnings may be withdrawn free of tax and penalties if used to pay for the costs of higher education. Beginning in 2002, EIRA proceeds may also be used free of tax and penalty to pay for the qualified expenses of a kindergarten through 12th grade education in public, private, and/or religious schools. EIRA contributions are limited to a maximum of $500 per year, but that’s in addition to the $5K limit on any other IRA. Beginning in 2002, allowable EIRA contributions increase to $2,000 per year.
For full details on contribution limits and distributions, see “The Education IRA.”