Friday, April 20, 2018

Changes Resulting from the Tax Cuts and Jobs Act

Near the end of 2017, the Tax Cuts and Jobs Act was signed into law. As a direct result of this bill, there have been many changes made to the tax code, changes that you should be aware of since
they could affect you and your 529 plan, particularly if you have children who are in private school or who may be in the years to come. 

For example, 529 plans can now, under the new law, be used for financing as much as $10,000 per year per child for a private school education.

It is important to understand, however, that while this change is federal, states can and likely will make their own new laws regarding 529 plans. It is likely, for example, that, in the near future, private schools will begin factoring 529 plans into their financial aid packages, which could mean that students are now eligible for less financial aid since, in theory, they will have other funds- their parents’ 529 funds- to access.

If you have a child in private school or you are thinking about putting your child in private school, talk to your financial advisor about whether or not investing in a 529 plan is a smart idea. Many are speculating that this change, while it seems positive at first, could actually end up hurting more than helping, as least as far as individual taxpayers are concerned. Plus, there is the uncertainty factor since no one knows exactly what regulations individual states are going to put into effect.

Thus, don’t be too quick to jump on the bandwagon of seeing this change as a good one. Talk about the potential implications with your tax advisor before making any quick decisions about how best to save for your child’s education, both now and in the future.