Section 529 plans give opportunities for families to save for the rising cost of college tuition fees. Education costs have been consistently increasing over the years. Federal financial aid is shifting from student grants to providing access to student loans. And this in turn leads to increased financial strain on students and their parents.
SECURE Act Expending 529 Plan Benefits
The good news is that the SECURE Act expanded benefits of 529 plans. It now allows principal and interest of the student loan repayments as eligible qualified expenses of 529 plans.
Limitations For the 529 Plans Qualified Expenses
But there are some limitations:
- payments of principal or interest on any qualified education loan of the beneficiary, or beneficiary’s sibling, are allowed. but only up to a cumulative maximum of $10,000 per beneficiary and sibling,
- payments made from any tax-free 529 plan earnings do not qualify as qualified expenses
- reduce qualified expenses, including student loan payments by any tax-free assistance such as scholarships and fellowships, grants, amounts used to calculate an education credit and other similar items.
To find out more about the college savings plans and other tax benefits for education, click here.
The 529 plans are a great tax planning tool. If you’d like to find out more how you can save for your kids’ future or need help with your taxes give us a call or schedule an appointment online.
This material is for informational purposes only. It does not constitute tax, legal or accounting advice.