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.Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.