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Teipen Selanders Poynter & Ayres details IRS and Department of Treasury education savings plan changes

Posted on August 8, 2018

Three recent tax law changes affecting popular 529 education savings plans have been announced by the IRS and the Department of the Treasury – and they could affect you and your family.

Here’s what changed:

  • 529 plans may now be used to pay up to a total of $10,000 of tuition per beneficiary, per year for K-12 schooling, regardless of the number of contributing plans. 529 plans may be used for an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing.
  • No changes for now on the 2015 Protecting Americans From Tax Hikes (PATH) Act and the 2017 Tax Cuts and Jobs Act. Taxpayers, beneficiaries, and administrators of 529 and Achieving a Better Life Experience (ABLE) programs can rely on existing rules described in this link until the Treasury Department and IRS issues further clarifying regulations.
  • The PATH Act governing Tuition refunds was broadened. Now, a student who receives a refund of qualified tuition expenses such as a 529 savings plan may keep his/her tax-free refund (for instance, when a class is dropped mid-term) if the beneficiary re-contributes the refund to any of his/her 529 plans within 60 days. Re-contributions would not count against the plan’s contribution limit.
  • Funds may now be rolled over from a designated beneficiary’s 529 plan to an ABLE account for the same beneficiary or a family member. ABLE accounts are tax-favored accounts for those who become disabled before age 26, and can enable young people and their families to save and pay for disability-related expenses.

These new regulations also stipulate that rollovers from 529 plans, together with any contributions made to the designated beneficiary’s ABLE account cannot exceed the annual ABLE contribution limit of $15,000 for 2018.

If these new changes affect any existing 529 education (or other) savings plans in your family, feel free to connect with us to assist in hashing out any extenuating circumstances. We are here to help.