529 savings plan - Can now be used for High School tuition/expenses

Discussion in 'Service Academy Parents' started by justdoit19, Mar 20, 2018.

  1. justdoit19

    justdoit19 Member

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    We had our tax appointment last night and learned something I am sharing. Effective for 2018, 529's can now be used to pay for high school (public or private) expenses. Until this year, a 529 was limited to college only. One tax strategy for those wondering about their 529's for their service academy bound student, is to roll it (or part of it) into a younger siblings account to pay for high school expenses (IE tuition, in our case). As always, consult your tax adviser. And this is our own experience.

    https://www.cnbc.com/2017/12/29/tax...elps-families-save-on-school-costs-taxes.html
     
  2. justdoit19

    justdoit19 Member

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    Also, it depends on what your state allows.
     
  3. AROTC-dad

    AROTC-dad Moderator

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    Not all states have a "clean" opportunity to use 529 monies for private HS. The reason is that some states describe Qualified Higher Education Expenses explicitly and independently of the federal government. Other states describe QHEE as being whatever the feds define it to be.

    So those states that don't defer to the feds and also have not altered QHEE to match the feds could cause parents to violate state tax law while being compliant with federal tax law.

    My personal issue with using 529 funds for private primary or secondary school, is that the investments may not have had time to grow sufficiently. The real benefit of a 529 plan is the tax free growth. If you only invest for a couple of years, the tax free capital appreciation has not had time to develop and you have paid investment fees for little benefit. Waiting for college allows the time value of money to work its magic and in this case tax free growth.
     
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  4. justdoit19

    justdoit19 Member

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    Agree with all of this. As someone who has funds placed for my new appointee, I was Interested to know that there is potentially now another option for my appointee’s funds: roll them into younger bro’s account for his HS or college tuition (HS however is the only new option). I hadn’t seen that discussed as an option here on the forums: only ways to use them at the academies.

    Again, check your local tax and 529 laws. However, it’s now at least a potential option per federal laws. As you and I stated, may or may not be allowed by state reg’s. Need to make sure before any assumptions are made.
     
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