529 Plans for 2018

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.

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Please call our office to talk about the changes to 529 plans and explore this opportunity to save more for a child’s education.