![]() ![]() If contributions or any additional funds gifted toward a 529 plan exceed $16,000 ($32,000 for couples), which is the current IRS annual gift tax exclusion, the surplus would be subject to the federal gift tax.K-12 tuition withdrawals beyond $10,000, or withdrawals used for non-qualifying expenses, are subject to income tax and a 10% penalty.Your annual contributions to a 529 plan are not tax deductible at a federal level.Other than the $10,000/year withdrawal limit for K-12 tuition expense, all other 529 plan rules apply: You may also trigger a 10% penalty on non-qualified withdrawals. If you withdraw funds for K-12 use and live in a state that doesn’t comply with the updates, you could be subject to state tax penalties or your ability to claim credits and/or deductions could be affected. One caveat to applying distributions towards K-12 education expenses is that not all states are compliant with the recent changes. Assuming annual tuition costs of $10,000, a 5.5% school cost inflation rate and a 529 plan rate of return of 7.7%, your 529 plan would help cover 54% of your child’s total private K-12 tuition costs. You make an initial deposit of $15,000 and monthly contributions of $396 through 12th grade. Note that the only qualified expense that is stated in the rules is “tuition.”Īs an example of how to use a 529 plan to pay for K-12 tuition, let’s say you open a 529 plan when your child is born. Find a financial advisor or wealth specialistįunds from 529 plans can be used for qualified K-12 tuition expenses, in addition to their traditional role in paying for college expenses.ĥ29 plan rules allow for up to $10,000 per year to be applied toward private elementary or secondary school tuition expenses. ![]()
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |