New education savings opportunity available for families
Published 7:24 am Monday, March 12, 2018
By Jean McDermott
Pacelli Catholic Schools president
The 2017 Tax Cut and Jobs Act expanded 529 savings plans to allow families to invest funds for K-12 tuition in addition to higher education expenses.
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Named after Section 529 of the tax code, the 529 plan is a tax-advantaged plan operated by a state or an education institution designed to encourage saving for college. The federal tax advantage is that earnings on funds contributed to 529 accounts are not federally taxed when withdrawals are used for education purposes. As of Jan. 1, 2018, 529 plans may be used for K-12 education tuition.
The primary benefit of a plan is that any earnings from growth over time are tax-free if they are used to pay for qualified education expenses. Secondly, contributions to a plan may be eligible for a State income deduction depending on where you live. Parent, grandparents, aunts, uncles, godparents and just about anyone else can give the gift of a Catholic education by opening a 529 plan for a child in their preferred state. At the age of 18, students may open plans for themselves. Multiple friends or family members may open separate accounts for a child or contribute to one single plan. If there is more than one child, accounts may be opened for each child.
The maximum amount that can be distributed tax-free per calendar year is $10,000 per student, regardless of the number of 529 accounts. If you have already started a 529 plan to save for your child’s college expenses, this is something that you should discuss with your financial planner as how to coordinate a plan for both K12 and college expenses. You may enroll directly with a state 529 plan manager or with your financial planner. A financial planner or accountant can help you select the best plan option for your preferred state and for your family’s needs.
The Declaration on Christian Education, “Gravissimum Educationis,” proclaimed during the Second Vatican Council, neatly summarizes parental choice in education as the following: “Parents who have the primary and inalienable right and duty to educate their children must enjoy true liberty in their choice of schools.” The expansion of 529 plans is a step in the right direction of providing equitable education choice.
If you are interested in learning more about Pacelli Catholic Schools visit our website at www.pacellischools.org, email email@example.com or call 507-437-3278. Preschool-Grade 12 registration for the 2018-2019 school year has begun. Several classes are already close to capacity. Waiting lists will be started as classes become full.