The House Republican tax reform plan, contained in its proposed Tax Cuts and Jobs Act, includes a provision to expand the Internal Revenue Code section 529 savings plans to include expenses for kindergarten-through-grade-twelve education and apprenticeship programs. The maximum annual amount of such expenses allowed from these plans would be $10,000.
Supporters of educational choice should embrace this proposal and advocate for its inclusion in the final, adopted tax bill. Simply put, expanding 529 college savings plans for K–12 education and apprenticeship programs will enable more families to access educational choice before their children enroll in college.
Current tax law restricts 529 savings plans to higher education and allows maximum annual contributions of up to $5,000 per year for each individual account ($10,000 for joint-income tax filers).
While contributions to existing 529 college savings plans are not deductible for federal income tax purposes, the accrued interest is not subject to federal tax.
In the process of proposing to expand the 529 plans to K–12 education and apprenticeship programs, the House GOP tax plan would eliminate Coverdell Education Savings Accounts, which is the current savings vehicle for K–12 expenses for up to $2,000 annually, since they would be duplicative.