Financial Tips

Financial Tips

Test Your Knowledge of New 529 Plan Rules
(Updated: 02/02/2018)

True or false? 529 plans can now be used to pay for tuition at elementary or secondary schools.

 

 

 

Answer: True

The Tax Cuts and Jobs Act of 2017, which went into effect on January 1, 2018, expanded the definition of a “qualified higher education expense” to include tuition for K–12 schools. This means withdrawals to pay for a child’s private school will be federally tax free, up to a maximum of $10,000 per beneficiary, per year.

Before you start taking advantage of this change to the 529 plan structure, however, check with your state and your plan. Savingforcollege.com reports that as many as 30 states have not yet changed their own laws to comply with the federal law, which means you could face an unexpected tax bill if you withdraw 529 plan funds to pay for K–12 tuition.

 

 

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