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Per IRS Publication 970 Tax Benefits for Education, page 38

What is the tax benefit of the Coverdell ESA? Contributions to a Coverdell ESA aren't deductible, but amounts deposited in the account grow tax free until distributed.

    If, for a year, distributions from an account aren't more than a designated beneficiary's adjusted qualified education expenses (AQEE) at an eligible educational institution, the beneficiary won't owe tax on the distributions. See Tax-Free Distributions, later. Table 6-1 summarizes the main features of the Coverdell ESA.

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