These topics will be discussed in future tips. Quite simply, this is how an Education IRA can work. They have a newborn grandchild. However, as long as the Education IRA is used for qualified educational expenses, distributions are not considered taxable income. This means that all appreciation escapes federal taxation.
Donors receive no deduction for contributions.
As long as the Educational IRA is used for qualified educational purposes there is no federal income tax on gains. A qualified beneficiary is under the age of 18. Generally, except for distribution made after the death or disability of a beneficiary, the distribution will be included in income of the beneficiary. Educational IRA cannot be rolled over to other types of IRA's. However, the funds can be distributed from the educational IRA and put into an educational IRA for another family member without incurring taxes or penalties.