Thanks to a change included in the Tax Cuts and Jobs Act adopted by Congress in December, parents can now save tax-free for their children’s public or private education from kindergarten through college.
Effective Jan. 1, parents, grandparents and other owners of 529 plans – a tax-advantaged savings plan designed to encourage saving for future college costs – can now withdraw up to $10,000 in savings annually from these accounts if they choose for elementary and secondary school tuition, without incurring federal of New Jersey state taxes.
The New Jersey tax code does not allow annual contributions to 529 savings plans for each beneficiary to be deductible on state income taxes, but does allow for tax-free withdrawals for qualified higher education expenses and K-12 tuition, as the federal government now permits.
Additional details on the 529 savings program and the recent changes made, including a “frequently asked questions” section, can be found on a new nonprofit website www.529K12facts.org. This website also provides information on the features of 529 plans available specifically by state.