Q&A: How Much K-12 Tuition Can I Reimburse from 529 Plan?

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Thanks to the Tax Cuts and Jobs Act (TCJA), the qualified expenses of 529 accounts have been expanded to include elementary and secondary education tuition. This opens up the usefulness of 529 accounts to more families.

If you are currently paying K-12 tuition, then you may benefit from opening a 529 plan.

When you contribute to a 529 plan, you can receive a state tax deduction. Then, when you distribute for qualified expenses, those distributions are both federal and state tax free.

Unfortunately, the IRS clarifies:

K-12 education

One of the TCJA changes allows distributions from 529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing.

This means that, even if your private school tuition is higher, you can only reimburse up to $10,000 of tuition per beneficiary per year. However, $10,000 of tuition is a large opportunity for deduction.

With multiple VA 529 plan accounts open for the beneficiary, a Virginia resident could receive a $10,000 deduction. That deduction would be worth the marginal tax rate (5.75%) this year or $575 of tax savings.

In other words, by flowing money through Virginia 529 accounts, a Virginia tax payer could receive a $575 discount on their private school tuition. This can be as simple as putting the money in one day, leaving it invested in cash, and taking the money out the next day.

Photo by Mattia Astorino on Unsplash

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Chief Operating Officer, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 700 financial articles. Her most popular post is "The Complete Guide to Your Washing Machine" while one of her favorites is "Funding a 3-Year-Old’s Roth IRA."