New Rules: What You Can Pay For With A 529 Plan

You may already know that there were significant changes to 529 plans with the recent Tax Cuts and Jobs Act. If you expect to pay for elementary, middle or secondary school education for your kids or grandkids, the changes are good news, and will help your money go farther.

One major overhaul is that starting in 2018, you can use up to $10,000 of 529 funds per year per beneficiary to pay public, private or religious K-12 tuition or home-schooling expenses.

And of course, this is in addition to the post-secondary (college, vocational and grad school) expenses you were allowed to pay previously.

If you think you might use 529 funds to pay for K-12 expenses, take a look at the guidelines first because there are some important restrictions.

First of all, you can only use 529 funds to cover K-12 tuition and fees – nothing else. (This differs from the rules for college, which permit broader categories of allowable expenses).

Secondly, the limit is $10,000 per child per year. So if the grandparents are kicking in some money from a 529 account they control, and the parents are paying the rest, the grand total per child from all 529 sources cannot exceed $10,000 per year, even though your actual tuition may exceed these amounts at many private schools.

Tip:  There’s a handy chart prepared by by Martha Kortiak Mert on the Savingforcollege.com web site showing what expenses you can pay for with your 529 plan. The chart has been updated to show the Tax Cuts and Jobs Act changes.

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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