The Tax Cuts and Jobs Act, which was signed into law in December 2017, allows families to use 529 plans to pay for up to $10,000 in tuition expenses at elementary or secondary public, private or parochial schools. The changes became effective January 1, 2018.
529 plans offer tax-free earnings growth and tax-free withdrawals when the funds are used to pay for qualified expenses. Prior to the Act, the definition of qualified expenses was limited to costs associated with attendance or enrollment at a college, university or other accredited post-secondary institution. Today, families can also take tax-free withdrawals to pay for up to $10,000 of K-12 tuition.
Over 30 states offer a tax credit or deduction for a contribution to a 529 savings plan. In most cases, residents must use their home state’s plan in order to qualify, but families who live in Arizona, Kansas, Minnesota, Missouri, Montana and Pennsylvania can claim a tax deduction for contributions to any state’s 529 plan. Maximum deductions and credits vary by state.
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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