529 Education Savings Accounts and K-12 Education
The recently passed 2017 Tax Cut and Jobs Act makes provision for families to use the 529 College Saving Plans that had been available solely for higher education expenses to be used now for tuition for students in grades k-12. Earnings on funds contributed to 529 accounts are not federally taxed when withdrawals are used for elementary and secondary school tuition or college educational expenses.
These plans are created and administered at the state level with specific regulations that differ across states. In most cases, states allow funds to grow free of state taxes and some may also grant deductions or credits on the funds deposited as well as on the earnings. Each state tax code determines how the funds may be used for tax advantages, and may levy fines if withdrawals are used inappropriately. Some states specifically designate only higher education usage and may not allow for k-12 use without legislative action.
The next edition of Momentum magazine will have a comprehensive analysis of these plans. In the meanwhile, the prudent course of action is to counsel families to consult with their accountant or a tax attorney to obtain the relevant information before making any withdrawals for elementary and secondary school tuition.
In support of the National Catholic Educational Association’s (NCEA) 44th National Catholic Schools Week (CSW), Rep. Daniel Lipinski (D – IL) along with 20 co-sponsors, introduced House Resolution 692 and Sen. Joseph Donnelly (D – IN), along with several co-sponsors, introduced Senate Resolution 382 to officially recognize the contributions of Catholic elementary and secondary schools in the United States. Click here to read more.