Expansion of 529 Savings Accounts Can Help Parents Pay for Christian Education
The recently passed Tax Cuts and Jobs Act includes a significant school choice option that parents can use immediately: 529 savings accounts for Christian K-12 education. The federal Tax Cuts and Jobs Act reform bill expanded qualified uses of the already existing 529 plans, a tax-advantaged savings plan for higher education costs, so that as of January 1, 2018, 529 savings accounts can now be used for K-12 expenses without incurring any federal tax penalty. Deposits in these savings plans are exempt from federal taxes, and most states offer additional tax benefits for contributions to the plans, making these an enticing way to save for educational expenses.
With this new opportunity, there are several things schools and parents should keep in mind:
- Verify: Verify Minnesota’s treatment of 529 accounts. For parents who already have a 529 savings account, parents should verify whether MN will apply the same tax benefits to K-12 education expenses as higher education. Several states will have to update their tax codes in order for their programs to reflect the federal change in 529 plans, and some states might respond by withholding tax benefits from 529 plans used for K-12 expenses.
- Investigate: School leaders and parents interested in taking advantage of these newly expanded 529 plans, should check with MN’s provider on specific deductibles or tax credits. Some states even allow residents to take advantage of 529 plans opened in other states. Parents should investigate across state lines to see if there are cost-effective programs in other states. See the included chart for basic features and benefits of different state plans.
- Ask: Forty-nine states plus the District of Columbia have at least one 529 program. To find one that is best for you, and to navigate the seemingly endless investment options, reach out MN’s provider by visiting MN’s 529 website or talk to a financial professional. They can help you gather all the tools and information you need to make an educated decision about your child’s future.
To help you navigate the new change in law, included is a chart of state 529 plans. For more information on 529s, see the resources listed at the bottom of this memo or visit your state’s 529 website.