Big financial news! The 2017 Tax Cut and Jobs Act has allowed for the expansion of usage on 529 Tuition Savings Plans! Effective January 1, 2018, expenses covered by 529 accounts (historically known as “college” savings accounts/plans) have been expanded to include elementary and secondary school tuition. People may now use up to $10,000, each calendar year, from a 529 account for K-12 tuition (public, private, or religious).
If you are not familiar with 529 plans, investment earnings in a 529 plan are not subject to federal capital gains tax and generally not taxed by state governments when used for qualified education expenses. Meaning, these plans are a great tax-advantaged way for families to save for education expenses for their children (or even grandchildren).
Key Points On 529 Plans
- The main advantage of a 529 plan is that earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses (tuition, fees, books, etc.)
- It is notable that, as of 2016, computers and related equipment for students qualified as education expenses under 529 plans as well.
- If parents already have a 529 plan established for their student or want to start a 529 plan, the earnings can grow and be withdrawn tax-free for K-12 tuition as well as college.
- If parents have a 529 plan already established for their child, they can begin using up to $10,000 from the plan for tuition at Nashua Catholic (or St. Chris, Trinity, or BG or some combination) per year.
- “529 Plans: Questions and Answers”
- “An Introduction to 529 Plans” (This has not been updated yet for the new 2018 rules that expand the use of 529 plans to include elementary and secondary school tuition)
- “What you can pay for with a 529 plan”