QUALIFIED tuition plans (referred to as Section 529 plans) are established to help families save for college education in a tax-advantage way. These plans are sponsored by states, state agencies, and educational institutions and are authorized by Section 529 of the Internal Revenue Code. They are designed to encourage saving for future education costs.
Funds are contributed and invested to earn either dividends or capital gains. Distributions are tax free if funds are used to pay “qualified higher education expenses” of the student beneficiary.
Old law:
Old rules allowed tuition for college but not for elementary or secondary schools as qualified higher education expense.
New law:
The Tax Cuts and Jobs Act (Act) adds elementary and high school to the equation. It 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.
Limits:
There is a limit to how much of a distribution can be taken from a 529 plan for these expenses. 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.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].
