529 Plans – Education Savings Plans

The tax overhaul bill passed by Congress in December 2017 provided a change to the College 529 plans. Formerly, these plans only provided preferential tax treatment of account distributions if the money was used for higher education. The new tax bill now allows tax-free distributions for primary and secondary private education for up to $10,000 per plan beneficiary. Distributions are paid to the owner/trustee of the account and are for tuition only.

For years, 529 plans have allowed parents, grandparents and others to contribute money to an investment account that allows tax-free growth of investment returns and tax-free distributions as long as those distributions were for higher education expenses. As such, these plans have allowed for a very efficient method of saving for college that has now been extended to primary and secondary within the allowable limits.

If parents and grandparents wanted to get a started on saving for education, plans can be started when children are infants to be ready for either primary, secondary or higher education expenses. Gifts of up to $15,000 per year per beneficiary can be made to a 529 account up to an account maximum of $475,000 per beneficiary.