Gary W. Pelletier, CLU, ChFC, AIF®

Northeast Planning Associates, Inc.

Corporate, Estate

& Financial Planning


529 Education Savings Plans – Not Just for College Anymore

| February 20, 2018
Share |

Last month we looked at a high-level summary of the changes as a result of the recent Tax Cuts and Jobs Act.  One of the more significant changes outside of tax brackets is the classification of secondary school expenses as qualified.

A major win for those who send their children to private secondary schools, the new tax law now allows for up to $10,000 per year per beneficiary to be used for qualified K-12 education expenses.  If private school is a desire for your family, this is even more of a reason to begin saving early.   

As a reminder, you have the option with 529 plans to contribute up to the annual gift tax exclusion amount ($15,000 per donor in 2018) without filing a gift tax return, or you can load a 529 plan on the front-end with five years’ worth of the gift tax exclusion amount ($75,000 per donor), commonly referred to “super-funding.” 

Finally, if you plan on using savings from a 529 for both secondary and post-secondary schooling, from an allocation perspective, it will be important to either have two 529 accounts set up (one for secondary education, and one for higher education) or to strategically manage the allocation of a single 529 account.   This will help to plan for the money needed in the near-term and allow the money needed later on to potentially weather any volatility that may arise. 

Content in this material is for general information only and not intended to provide specific financial, tax, or legal advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal. Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Non-qualified withdrawals may result in federal income tax and a 10% federal tax penalty on earnings.

Share |