Also keep in mind that each state has their own rules for the tax treatment of withdrawals.Īs you may know, you can also use 529 funds to pay for up to $10,000 in eligible federal student loan debt. To find out for sure whether an apprenticeship you’re interested in counts, you can check whether the apprenticeship program is registered and certified under The National Apprenticeship Act. So, if the apprenticeship qualifies for a withdrawal, you can pay for all the fees, supplies, books, and equipment needed to participate in the program. For instance, this act made it possible for parents to withdraw funds tax-free and without penalties for apprenticeship-related training costs. The SECURE Act, which stands for Setting Every Community Up For Retirement Enhancement, covered many federal tax law changes, including changes to 529 college savings plans. If your child is moving through school and it doesn’t look like they’ll need every dollar you have saved, then using the 529 funds for private K-12 education now can help you spend your savings down in a tax efficient manner. While this situation is certainly rare, there are definitely times when parents overplan and oversave out of an abundance of caution. If the money in your 529 fund is invested for long-term growth (as it should be), then using some money for K-12 private education expenses without having to pay taxes on those gains could be a smart move.įinally, it could also make sense to use 529 funds to pay for private school if you believe you have overfunded your account. This possibility is more likely to come into play if you started investing 529 savings funds aggressively from a child’s birth. Meanwhile, Vermont’s official 529 college savings plan, VHEIP, gives each taxpayer a 10% Vermont state income tax credit on the first $2,500 contributed within a year.Īnother reason to use a 529 plan to pay for K-12 education is to take some gains off of the table. That translates into $1,000 back from the state when they max out this amount in a year, which is an instant 20% return on their money. In the state of Indiana, for example, taxpayers get a 20% tax credit when they contribute up to $5,000 to a 529 plan within a year. While it would be nice if families could tap into 529 funds to pay for ancillary private school costs as the pandemic runs its course, there are still plenty of reasons it makes sense to fund private school through a 529 plan if your child attends one.įor starters, some families live in states where tax benefits are granted when you contribute to an eligible 529 college savings plan. These costs could include computers needed to attend private school e-learning, computer software, and more. Parents can use 529 college savings funds for private school tuition, but the funds cannot be used for additional costs involved in attending from home. This may be somewhat bad news for private school families who are currently in the midst of a homeschooling crisis.
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