529 Plans for Private School - The Basics

published by:
Amanda Clouser, CFA, CFP®
September 11, 2020

Can 529 plans be used for private school?

As of January 1, 2018, 529 plans now allow distributions up to $10,000 per year for public, private, or religious K–12 schools. 529 plans continue to provide tax-free distributions for college-related tuition. And, contributions into 529 plans continue to grow income tax-free. 

Maryland taxpayers continue to receive a maximum $2,500/year deduction from their State adjusted gross income per beneficiary for contributions to the

Take advantage of this change:

If you are a family with young children that have budgeted for private school education, this 529 expansion may be a great way to save and accumulate tax-free for those expenses. 

  • When you don’t pay income taxes on growth, your account compounds more quickly and gives you more money to work with when it’s time to pay for private K–12 education or college. Check out this 
  • Front-load the 529 plan to provide as much time as possible to grow tax-free before needed withdrawals up to $10,000/year per child per year free of federal income tax to pay for private school. You can use the rest for college costs later.
  • If you must set aside money for private school tuition anyway, consider investing the maximum into a 529 to reap the tax deduction benefits, then withdraw it and pay your tuition bill.

Things to consider:

Decide how your family will prioritize savings for K-12 expenses with higher education needs. 

  • Because money for K-12 education has a shorter time horizon than for college, you will want to consult your investment professional to ensure you invest these savings correctly.
  • If you or your beneficiary live outside of Maryland, you may have to pay state income taxes on the K-12 distributions, as not all states have signed on for the 529 Expansion. Consult your tax professional.
  • Keep an eye on changing 529 rules. States may choose to impose time limits or other criteria in response to the impact this expansion may have on 2018 tax revenues.

RCS Financial Planning is a fee-only advisor and does not sell investment products. We do not receive commissions, kickbacks, or fees of any kind for recommending 529 Plans.

Have questions about your personal financial situation? Please contact us to discuss.

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