The 2018 Tax Reform Act has brought about many changes to the federal tax code. One element of the act that we have been receiving questions from clients is the use of 529 plans to pay for K-12 private school expenses.
Historically, 529 plans have been one of the best ways to save for college, as they provide tax-free growth as long as the assets are used for qualified higher education expenses. Congress recently passed legislation expanding the approved usage of 529 plan assets to pay for K-12 education expenses in addition to higher education.
While allowed by federal law, several states have not yet passed legislation to allow private elementary and secondary school expenses to be paid via 529 plans. Alabama is currently one of these states.
Other states may allow for the payment of K-12 expenses from a 529 plan, so for state-specific information, reach out to your financial or tax advisor.
We hope a change in Alabama legislation comes soon, and we will continue to monitor if and when legislation is passed.
by John P. Maloney, CFA
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