The Tax Cuts and Jobs Act, recently passed by Congress and signed by President Trump, includes several provisions which will significantly impact 529 Plans:
Previously, families could only use the funds in a 529 Plan to pay college education expenses at eligible academic institutions. Beginning in 2018, families will, also, be able to withdraw funds from 529 Plans to pay qualifying expenses at K-12 private and parochial schools.
However, the 529 funds will not be available for homeschooling expenses (as originally proposed by Betsy Devos, Trump’s Secretary of Education).
The annual dollar limit on tax-free withdrawals from 529 Plans used to pay for K-12 education expenses will be $10,000 per beneficiary. There is no annual dollar limit on tax-free funds that can be withdrawn from 529 Plans to pay eligible college education expenses.
Beginning in 2018, it will be permissible to roll over funds from a traditional 529 Plan to a 529 ABLE Plan for the benefit of a disabled student. Once in the ABLE Plan, the funds could be withdrawn to pay expenses including education, job training and support, healthcare and financial management.
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