There is great news for SBCA parents in “The Tax Cuts and Jobs Act!” The Act provides families with more opportunities to save and pay for education options that are the right fit for their children. The law expands the uses of “529 college savings accounts” (named after Section 529 of the U.S. Code) to include K-12 private school tuition. Specifically, you can now use withdrawals from your 529 plan to pay your child’s SBCA tuition.
529 plans are savings/investment accounts that allow savings and investments to grow tax free for families saving for higher education and now K-12 private school tuition expenses. Withdrawals from 529 accounts used to pay for eligible expenses are not subject to federal income tax. In other words, the interest and growth are not taxed. The Tax Cuts and Jobs Act, signed into law December 21, 2017, simplifies the process of saving for a child’s K-12 and postsecondary education needs and gives families more freedom with their own savings.
No income restrictions exist on either the contributor to a 529 plan or the beneficiary of a 529 plan. Under the new law, families can contribute to 529 plans, benefit from interest accruing in the accounts free from federal tax (it is expected that Alabama will follow), and use those funds for K-12 private school tuition and postsecondary expenses. Families can spend up to $10,000 annually on tuition expenses at an elementary or secondary public or private school.
Marshall Blake of Wells Fargo Financial specializes in 529 Plan set-up and has agreed to be a resource for SBCA parents. He can be reached at 251.344.3354.
KEY POINTS
- 529 plans are savings/investment accounts that allow savings and investments to grow tax free on savings for higher education and now K-12 private school expenses.
- Withdrawals from 529 accounts used to pay for eligible expenses are not subject to federal income tax.
- Under the Tax Cuts and Jobs Act, families can now spend up to $10,000 annually on tuition expenses at an elementary or secondary public or private school from their existing or new 529 plans.
