Opinions vary wildly about the positives and negatives of the Tax Cuts and Jobs Act, the sweeping tax reform legislation passed by Congress in December, with many people still uncertain whether the bill will help them or not.
One group that does have a reason to smile, however, includes parents of Catholic school students. They will now be able to use money they save to help fund education for all of their kids, not just college students.
That is because the tax reform plan now allows $10,000 per year from funds in 529 accounts to be used toward elementary or secondary school tuition, not just college education.
For those unfamiliar with the term, 529 plans are tax-advantaged savings plans designed to encourage parents to save for future college costs for their children. They take a similar approach to retirement accounts that allow people to save for their retirement while also receiving tax benefits.
Most 529 plans are sponsored by states or state agencies, and the one used here is the South Carolina Future Scholar plan.
According to information released to parents by the South Carolina Catholic Conference, starting in 2018, parents can take tax-free distributions from any 529 plan to pay for tuition at elementary, middle or high schools, including private and religious schools.
Families are limited to a total distribution of $10,000 per beneficiary, per tax year.
As an example, a family with two children who pays $24,000 in total tuition for Catholic education can take a tax-free distribution of $20,000 per year to help cover the cost of that tuition.
This is an addition to a state tax break that parents already receive for putting funds into a Future Scholar Plan. Parents are able to deduct the amount they put into the 529 plan from their South Carolina tax return.
Parents should contact their tax professional or a certified public accountant for more information about this and other provisions of the new tax plan.
To learn more about the South Carolina Future Scholar Plan, visit the link.
Photo provided: Students attend Mass at St. Peter School in Columbia.