October 15, 2018
Tax Reform 2.0 Further Expands Sec. 529 College Saving Plans
Legislation recently passed in the U.S. House of Representatives would further expand the tax free use of IRC Sec. 529 college saving plan funds beyond the enhancements made in the Tax Cuts and Jobs Act (TCJA) signed into law in December, 2017. This is positive news in light of efforts in the House last year to eliminate most of the current higher education tax benefits. Three different tax bills, collectively referred to as Tax Reform 2.0, were passed on the House floor prior to adjournment. They are not currently scheduled for consideration in the Senate.
Last year’s TCJA included language that allows families to use Sec. 529 savings for both higher education and K-12 private school expenses. There is a $10,000 limit on the use of funds for private K-12 expenses annually. In addition, the TCJA allows funds to cover computer and computer software expenses.
Sec. 529 funds can now be transferred between relatives, used for special needs services, and rolled over into ABLE Accounts, which are tax favored savings accounts for persons with disabilities. Up to $15,000 annually can now be rolled into ABLE accounts from Sec. 529 plans.
In addition to the TCJA expansions, the House has approved several additional provisions, including allowing Sec. 529 funds to be used for home schooling, apprenticeship costs, and loan repayment expenses. These three additional expansions are part of H.R. 6757, which passed the House in September.
The Senate may take up any of the three bills passed by the House, which also include making TCJA provisions permanent, and additional family and retirement benefit provisions. However, Senate leadership has not indicated if or when that might happen.
Last year’s TCJA included language that allows families to use Sec. 529 savings for both higher education and K-12 private school expenses. There is a $10,000 limit on the use of funds for private K-12 expenses annually. In addition, the TCJA allows funds to cover computer and computer software expenses.
Sec. 529 funds can now be transferred between relatives, used for special needs services, and rolled over into ABLE Accounts, which are tax favored savings accounts for persons with disabilities. Up to $15,000 annually can now be rolled into ABLE accounts from Sec. 529 plans.
In addition to the TCJA expansions, the House has approved several additional provisions, including allowing Sec. 529 funds to be used for home schooling, apprenticeship costs, and loan repayment expenses. These three additional expansions are part of H.R. 6757, which passed the House in September.
The Senate may take up any of the three bills passed by the House, which also include making TCJA provisions permanent, and additional family and retirement benefit provisions. However, Senate leadership has not indicated if or when that might happen.
For more information, please contact:
Karin Johns