TCJA Makes Changes to “529 Plans”

The Tax Cuts and Jobs Act (TCJA) has made some changes to qualified tuition programs (“QTPs,” also commonly known as “529 plans”) that you might be interested in. These changes take effect for 529 plan distributions after 2017.

As you know, a 529 plan distribution is tax-free if it is used to pay “qualified higher education expenses” of the beneficiary (student). Before the TCJA changes, tuition for elementary or secondary schools wasn’t a “qualified higher education expense”.

The TCJA provides that qualified higher education expenses now include expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. Thus, tax-free distributions from 529 plans after 2017 can now be used to pay these expenses subject to certain limitations.  The amount of cash distributions from all 529 plans per single beneficiary during any tax year can’t, when combined, include more than $10,000 for elementary school and secondary school tuition incurred during the tax year.

If you wish to discuss the impact of the new regulations on your particular situation, please do not hesitate to call.

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