Beginning in 2018, you can save more for a child’s education as a result of changes to qualified tuition programs (529 plans). You can use a 529 plan to pay up to $10,000 per year, per child, for K-12 tuition.
The 2017 Tax Cuts and Jobs Act modified the rules for 529 plans to help parents and other family members save more for a child’s education. Though contributions to 529 plans are not deductible, there is no income limit for contributors. 529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books and supplies. For someone who is at least a half-time student, room and board also qualifies as a higher education expense.
The definition of a qualified distribution has been expanded, beginning in 2018. Plan participants may now withdraw up to $10,000 for tuition incurred during the tax year in connection with the enrollment or attendance of the designated beneficiary at a public, private, or religious elementary or secondary school. This change applies on a per-student basis, rather than a per-account basis. Distributions over $10,000 are treated as taxable distributions under the general rules of section 529.
Please call our office to talk about the changes to 529 plans and explore this opportunity to save more for a child’s education.