Investing for the Future

November 7, 2018

Article from Fulcrum News, Winter 2018

529 Plans can now fund Catholic K-12 tuition. The 2017 Tax Cut and Jobs Act expanded 529 savings plans to allow families to invest funds for K-12 tuition in addition to college education expenses. Named after section 529 of the tax code, the 529 plan is a tax-advantaged investment vehicle operated by each individual state designed to encourage saving for college. Earnings on funds contributed to 529 accounts are not federally taxed when withdrawals are used for educational purposes. As of January 1, 2018, 529 plans may be used for K-12 education tuition as well.

The primary benefit of a 529 plan is that investment earnings grow over time tax-free if they are used to pay for tuition. Qualifying K-12 expenses are limited to tuition only (unlike qualified higher education expenses which cover tuition, room & board, computers, etc.). Secondly, contributions to a plan may be eligible for a state income deduction depending on where you live. While this is not a benefit in Washington state, it may be one for funders in other states.

“A great feature of these plans,” says Bob Breshock, Fulcrum Trustee and Chair of the Finance Committee, “is that they can be funded by anyone who wants to help. Parents, grandparents, aunts, uncles, godparents, and other family and friends can give the gift of a Catholic education by opening a 529 plan, or contributing to an already existing fund.”

Those interested in obtaining a 529 plan should consult with their financial advisor or accountant to determine specific state requirements and tax implications, so that they can select the best option for their families.

Download the entire 2018 winter newsletter here.