![]() ![]() When contributing to any savings account with tax-free growth, the longer you can let the investment compound, the more tax benefit you’ll see. According to Private School Review, an online resource for evaluating potential schools, the national average for private school tuition is around $10,300 per year, which includes both elementary and high school tuition. The National Center for Education Statistics reports that nearly 10 percent of all students are enrolled in a private school. ![]() This is a meaningful benefit to families who choose to enroll their children in private schools. The Tax Cuts and Jobs Act amended the treatment of 529 plans so that families can withdraw up to $10,000 per year tax-free for private elementary and high school tuition. Furthermore, contributions to Coverdell ESAs are not tax-deductible. These carry the low maximum annual contribution of $2,000 and contributions were phased out for tax filers with adjusted gross income of $220,000 for married filing jointly, and $110,000 for all others. If families wanted to invest funds to pay for private school in a tax-advantaged account, they were limited to Coverdell Education Savings Accounts. Prior to the reform, 529 Plans earnings growth and withdrawals were only tax free when used to pay for qualified higher education costs. The most significant change is that 529 Plans now include tax-free distributions to pay for private kindergarten through high school tuition and expenses. Much to the benefit of many taxpayers, many of the provisions were retained that encourage saving for higher education, help students and families pay for college, and assist with the student loan repayment. This flexibility means that these accounts should be considered as a key tax planning option for college funding for taxpayers at all income levels.It was touch-and-go there for a minute-Congress almost repealed more than a half dozen provisions in the tax code that help students of low- and middle-income families afford a higher education. Importantly, there are no income restrictions on either you, as the contributor, or on the beneficiaries of 529 plans. Also, there is no federal gift tax on contributions up to $15,000 per year for single filers and $30,000 for married filers. Contributions beyond this amount are not permitted, but the fund can continue to accrue tax-free earnings. The maximum account balance per beneficiary for the Path2College 529 Plan is $235,000. Withdrawals used for other purposes may be subject to tax on the earnings, as well as a 10% penalty, so it is important to talk to your tax advisor before you decide to do anything else with the funds. Up to $10,000 annually can be used toward K-12 school tuition per student from your 529 plan. Tax-free withdrawals may be used for tuition, fees, certain room and board costs, books and supplies, as well as computers and related technology costs such as Internet access fees and printers. For example, you could make the deposit on Apand have the deduction apply to your 2020 return. Note that this increase takes effect in 2020 under Georgia HB 266, signed into law in May 2019.ĭeductible contributions may be made for a taxable year up until the federal deadline for IRA contributions. The state tax deduction has been increased from $2,000 to $4,000 per year per beneficiary, for single taxpayers, and from $4,000 to $8,000 per year per beneficiary, for married couples filing jointly. In fact, the Georgia state tax benefits for 529 plans just got better. Earnings are not taxed at the state level, either, and Georgia offers a generous deduction for contributions. Contributions are not deductible on your federal tax return, but accumulated earnings are excluded from federal tax and may be withdrawn tax-free as long as the funds are used for qualified education expenses. The Path2College 529 Plan, sponsored by the State of Georgia, is a tax-advantaged way for parents and other family members to save for college, offering both federal and state tax benefits.
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