You may have heard that 529 plans can be used for more than just college expenses. The tax act passed in late 2017, expanded the use of 529 education savings plans to include private elementary and secondary school tuition costs. As with every tax law, there are rules and limits that you need to understand.
Here’s What You Need to Know:
- The maximum per year, per kid that you can take out of a 529 plan for K-12 tuition is $10,000.
- It is Tuition only – no uniforms, no supplies, no computers, no sports gear.
- Kansas and Missouri residents may get a state tax deduction for contributions made.
- Kansas: Can deduct up to $3,000 as a single taxpayer or up to $6,000 if Married Filing Jointly in contributions for each child.
- Missouri: Can deduct up to $8,000 in contributions as a single taxpayer or up to $16,000 in contributions for married filers.
- Other States: https://finaid.org/savings/state529deductions/
Here’s How You do it:
Let’s say the tuition for your child’s private elementary school is $3,000 annually. Take the $3,000 you would have paid directly to the school for tuition and deposit it first into the 529 plan. Then have the 529 plan send a check to the school for the tuition. You can also do this on a semi-annual, quarterly, or monthly basis or whatever frequency you prefer to pay tuition. By putting it in the plan first, you now have secured a potential state tax benefit that you didn’t have before.
Here’s What NOT to Do:
Don’t rob from the college savings. If you already have funds in a 529 plan building up for college, don’t steal from those funds, as those are meant for college. Use the money you would have paid for tuition and just funnel it through the 529 plan, letting the other funds in there continue to grow. If you are currently making monthly contributions to a 529 plan, don’t stop or change those, simply add your tuition funds on top of it.
Please reach out anytime!
Jamie Bosse, CFP®, RFC
Direct Office Line: 913-521-2905