2018 GOP Tax Plan - 529 Plans
Parents with young or school-age children will be pleased to hear that the new bill provides increases in the ability to use 529 college savings plans to support your children’s K-12 education. Previously, 529 plans could be used only to cover costs for college. The new law expands the qualified use of 529 accounts by allowing withdrawals for public, private or religious schools. Home schooling families are also allowed to use 529 funds towards educational expenses. If you plan to take advantage of this expanded ruling, note the limit of $10,000 per year, per child.
The new legislation also supports funding of ABLE accounts designed for use by people with disabilities. Under the new law, you can roll over 529 plan assets to an ABLE account. Both accounts must have the same beneficiary or a member of the same family, and you can roll over up to the annual gift exclusion amount, which is $15,000 in 2018. Now families will have more flexibility in planning for special needs, where predicting the level of future needs can be a challenge.
While not new in this tax bill, higher-income earners may want to note that 529 plan contributions are not subject to any income limits. While other tax-advantaged savings accounts like IRAs and Roth IRAs restrict higher-income families from contributing, 529 plans can be used regardless of your income level. With the flexibility provided by the new law, parents not currently setting aside money for education may want to reconsider earmarking some savings toward a 529 plan.