The new Tax Cuts and Jobs Act signed into law provides the most significant tax reforms since the Tax Act of 1986. These new sweeping changes will impact nearly everyone in the United States, but what does the new law mean for those saving for education?
The new law means immense changes for those saving for education. For each beneficiary, families now have the option to use up to $10,000 per year, in annual tax-free 529 plan withdrawals to cover elementary and high school costs. Before these funds could only be used on “qualified higher education expenses.”
This new law is great for families saving for education. Not only can families get a tax deduction or tax credit (depending on the state) for contributions to their 529 plans, earnings grow on a tax-free basis. When you withdraw money from your 529 account, it is considered tax-free if the funds are used for qualified education expenses, which now include tuition in connection with an elementary or secondary public, private, or religious schools. However, taxpayers need to beware: Several states still need to update their own tax codes in order to let current account holders use their existing funds for K-12 education.
The Barnes Dennig financial planning team is here to help! If you have loved ones in school, let us help ease the burden of education costs and at the same time save you money on taxes. Please contact us here or call 513-241-8313 to learn more about how fully take advantage of these 529 plans.