As many of you are aware, the 2017 Tax Cuts and Jobs Act ushered in sweeping changes all around. Some good, some not so good. For those with 529 tax-advantaged investment accounts paying for your child’s education may now be easier. Previously, you could only use 529 plan funds for paying qualified expenses for higher education (think university). The idea was that you saved from birth and your contributions grew tax free to pay in a tax-advantaged way for your child’s education. Some states even offer various state tax credits for contributions to 529 Plans. So, what’s changed?
Now 529 plan owners can pay for K-through-12 private school tuition! Up to $10,000 per child, per year for each account. This is a big change. For one, it is not the best use of plan funds for those struggling to save for college. If their child is in private school and plan owners dip into recently contributed funds for current tuition, the funds do not have time to grow. However, if a 529 plan owner is wealthier, and the state in which you live offers a tax credit, you can now fund the 529 plan, get the state tax credit, and pay for private school tuition.
Each 529 plan owner’s individual situation will determine if the change is good. Overall, if you have the financial ability and live in a state with a tax credit, this could be beneficial. If you don’t, and you dip into funds early for K-through-12 tuition, this could reduce your available funds to pay for college.
Working with a Certified Financial Planner™ you can target specific school options and calculate the future anticipated tuition of a specific private school or state school and craft a plan to meet your funding goal be it for current tuition or for university. As parents, you have the choice of funding a percentage of the education bill or asking your child to work and pay for part of their own education. Factoring in grants, scholarships, awards, and loans is also part of the equation. The key is to get help early on, have a plan and let time work to your advantage. One thing you do not want to do, is fund education without funding your own retirement first. Retirement should take precedence. Remember, your child can borrow for school if needed; you can’t borrow to fund your retirement.
Let’s do this! As an independent Certified Financial Planner™, I can help you plan your child’s education tailored to your goal, timeline and resources. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #529 #529plan #collegedream