- 1). Take a distribution of the assets from the ESA. You are allowed to take tax-free distributions from the ESA as long as they are paying for a legitimate college expense.
- 2). Open an Education IRA, also referred to as a college 529 plan. These are available at banks and brokerage firms.
- 3). Deposit the money from the ESA distribution into the Education IRA before the calendar year ends. An Education IRA is considered a pre-paid college savings program. Because it is a pre-paid college expense, it is considered a qualified expense for an ESA.
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