MO-529 Tax Relief
Parents in Missouri can now get a state tax deduction for private school tuition, thanks to the federal tax overhaul passed in December, 2017. Here are the four things you need to know about 529 plans and how the recent overhaul might affect your son’s education.
1.It’s an investment fund.
First, the 529 is an investment plan. Many people refer to 529s as ‘saving plans’, however your contributions don’t just sit there until you decide to use them. They are invested and given the opportunity to grow! Basically, think of it as a 401(k), but for your son’s education.
2. You can now use 529 monies for K-12 expenses.
Initially, the 529 plan was designed to allow families to invest money over a long period of time for college expenses. However, part of the new law allows families to use state-sponsored 529 plans to pay for K-12 expenses, such as tuition, books, and tutoring.
3. You can deduct up to $10,000 from state taxes a year for 529 contributions.
Missouri residents can deduct up to $10,000 a year for contributions to 529 plans from their state taxes under the new law. While Illinois residents would be able to deduct up to $8,000, if the law is changed to permit it. So, if you’re planning to send your son to a private Catholic school, you can deposit the tuition money into a 529 and get a state tax discount.
4. You can withdraw earnings from the plans tax-free.
529 plans are classed as tax-free compounding - meaning that earnings aren’t treated as taxable income! Your investment earnings in the account grow tax-free, and you won’t be taxed when you withdraw the funds to pay for qualified expenses. With the new law, this includes K-12 tuition.
So there you go, there’s the four things you should know about the federal tax overhaul. If you’re considering utilizing a 529 savings plan to fund your son’s private education, check out our academics section and discover how our philosophy shapes the men of the future. For more information about how you can benefit from 529 savings, contact your tax advisor!