Previously, 529 plans could be used only to cover costs for college and other post-secondary educational expenses. The new tax bill changes that, allowing use of 529 savings plans to support children's K-12 education, and authorizes 529 accounts withdrawals for public, private or religious schools. With this expanded flexibility, families not currently setting aside money for education may want to reconsider earmarking some savings toward a 529 plan.
Got a kid or grandchild headed to college....sooner or later? December is a great time to set up and contribute to a 529 plan, to take advantage of this year's annual gift exclusion amount. 529 plans are an efficient and cost effective way for parents and other family members to help pay for accredited post-secondary educational expenses. "529" is a reference to the Internal Revenue Code section setting out the terms and conditions for qualified tuition plans. All 50 states and the District of Columbia, as well as many state educational institutions, provide or spo nsor 529 plans where income earned on assets are not subject to federal income tax and may not be subject to state income tax if ultimately used for qualified educational expenses.