The 529 Expansion

NewImageThe new tax bill will expand 529s to cover K-12 education! Now I need to figure out if I can start a 529 for each of my grandkids to cover their private schooling needs. 

Here’s some background from US News & World Report

Education was mostly a sideshow in the massive tax overhaul Congress passed just before Christmas. But one marginal issue passed in the dead of night may end up playing a big role in the school choice debate going forward.

Under the new law, money from 529 college savings accounts can now be used for private elementary and secondary education expenses. 529s are savings accounts where you can put after-tax dollars earmarked for college expenses (and now elementary and secondary expenses) into an account where that money grows tax free.

That change was the result of a late-night amendment by Republican Texas Sen. Ted Cruz that only passed with Vice President Pence casting a tie breaking vote. The provision is lousy public policy and even many choice advocates opposed it, but it’s a big political win for proponents of education tax credits and using the tax code rather than direct spending to advance school choice…

4 thoughts on “The 529 Expansion

  1. Run the TVM calculations. For K through 6, there is probably not much advantage unless you open them at birth and give the 529 enough doubling time. Also, every state has their own version. A couple of years supposedly Utah was providing the best returns. IMO, 529s crush for college since the time horizon is long enough to generate decent compounded returns. K-12, not that exciting. Too short a time span especially on declining balance that is not compounding. But run the numbers. I’d be interested in seeing your analysis.

    • These are all good points.
      But I wasn’t thinking so much in terms of numerical growth than the tax breaks.

      • Run the numbers and see if there truly is an advantage. 529 investment options are quite restrictive vs something wide open like a UGMA Custodial Account where you can invest in individual stocks. One other advantage for 529s is that you have the option of changing the beneficiary to a sibling or first cousin, so you might just try opening one 529 account for one just one of grandchild knowing that you can change to another grandchild later. Best wishes for 2018 and beyond for you and your family. 🙂

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