LA 529 Start Plan for HS Tuition

The actual amount of the Earnings Enhancement is calculated by multiplying the annual deposits to an account by the Earnings Enhancement rate applicable to the account category.

For account Categories I, II and III, the Earnings Enhancement rate is based on the account owner’s reported federal adjusted gross income (AGI) for the preceding taxable year (the AGI for tax year 2010 will be used to calculate Earnings Enhancements for 2011 deposits), according to the following schedule:
Reported AGI Rate Earnings Enhancement
$0 to $29,999 14%
$30,000 to $44,999 12%
$45,000 to $59,999 9%
$60,000 to $74,999 6%
$75,000 to $99,999 4%
$100,000 and above 2%
For account Category IV the Earnings Enhancements are based on the two percent (2%) rate.
For account Category V, no Earnings Enhancement is paid.
For account Category VI, the Earnings Enhancements are based on the federal AGI reported for the previous year by the beneficiary’s family and are paid to the same rate schedule as used for account Categories I, II and III.
For account Categories I, II, III and VI that do not provide documentation of the federal AGI, the Earnings Enhancements are based on the two percent (2%) rate.

Earnings Enhancements are awarded annually and posted to individual accounts as of December 31 of each year.

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There are six categories:

Category I
Parents, grandparents, court-ordered custodians, persons claiming the beneficiary as a dependent on their federal income tax return, if, at the time the Account Application is submitted, the account owner or beneficiary is a resident of the state.
Category II
A person or persons determined by LOSFA to be a Member of the Family of the beneficiary and, at the time the Account Application is submitted, the account owner or beneficiary is a resident of the state. Members of the family include, in addition to the beneficiary’s spouse, adults related to the beneficiary as brothers, sisters, aunts, uncles, first cousins, in-laws, step-parents, step-siblings, and spouses of these listed persons.
Category III
An Independent Student who is a resident of the state.
Category IV
Any other person or Legal Entity if, at the time the Account Application is submitted, the beneficiary is a resident of the state.
Category V
Any other person or Legal Entity that, at the time the Account Application is submitted, is a resident of the state and the beneficiary is not a resident of the state.
Category VI
Any other person or Legal Entity or any government entity, and at the time of the submission of the Account Application:
The beneficiary is a resident of the state;
The federal adjusted income of the beneficiary’s family is less than $30,000 or the beneficiary is eligible for a free lunch under the Richard B. Russell National School Act (42 U.S.C. 1751 et seq.); and
The beneficiary is not a member of the account owner’s family and is not a member of the family of any member or employee of LATTA or LOSFA.

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Earnings on START accounts are tax deferred until withdrawn. If the funds are used to pay Qualified Higher Education Expenses, the earnings are exempt from both state and federal taxes. Deposits to START accounts are deductible from reported Louisiana income, up to $2,400 per year, per beneficiary. Unused portions may be carried forward to subsequent tax years. Married couples filing jointly may deduct deposits to START accounts from Louisiana State Taxable Income up to a maximum of $4,800 per year, per beneficiary, and any unused portion may be carried forward to subsequent tax years. An account owner of a Category VI account may deduct twice the amount deposited per account per taxable year, up to $2,400 in donations. If the Category VI account owner does not use the full $4,800 exemption in any tax year, any unused exemption may be rolled forward to be used in future tax years.

LINK

I don’t even think you get the tax break for k12. Correct me if I am wrong.

Oh damn nice.


Maybe I’m misremembering or maybe it has changed at some point recently but I remember not getting the state income tax deduction for contributions when I started one 3 years ago.

I believe they’ve always had it. We contribute the max $4,800 annually and get $204 back when filing our state income taxes.

You might be able to carry forward any unused deductions in prior years, your CPA would know.

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don’t even think you get the tax break for k12. Correct me if I am wrong.

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This.

To avoid the exact scenario the OP is describing - deposit into 529, get immediate tax break and earnings enhancement then withdraw money for school in the spring - neither are available on the K-12 version.

Basically the only benefit of the K-12 version is tax free growth and withdrawal.

ETA - to clarify, you can’t double dip on the tax break. You either get the start deduction or the tuition deduction - not both. If you owe $5,000 in tuition in 3 months, you’re better off just taking the Elementary and Secondary School Tuition Credit and not messing with START.

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cant you only withdraw 529 for Higher education expenses? How would you go about withdrawing for K-12 Expenses from the base 529 plan?

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Yeah I commingled terms but I was referring to the START K-12 plan when I said 529.

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One advantage of the START K-12 program is that you are not taxed on earnings. Seems like the best strategy would be to contribute to START K-12 from birth-Kindergarden, then stop contributing once you have actual tuition expenses then claim the tuition deduction. Unless I'm misunderstanding something?

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No you have it right. I’m sure saving while they’re in school could be beneficial for some too. Maybe?

For my personal situation, I can write off $2,400 for Start K-12 contributions, saving me $102 (4.25% marginal rate). While tax free growth is nice, any START funds used cannot be also used to take the private school tuition deduction, so ideally START would cover the amount over the annual limit, which is now $6,000 per child.

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The best way for me to maximize the deduction is to pay $6,000 out of pocket, and use my saved START funds for the remaining balance of tuition?

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Seems that way to me. Tax free growth is great and all, but you have to use it at some point so that strategy makes the most sense to me.

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Also, am I correct in understanding I cannot write off $2400 of START deposit and also claim the $6,000 Tuition deduction in the same year?

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I kind of butchered this explanation so I’ll try again. Specifically for K-12, you can claim a deduction for up to $2,400 per beneficiary in a year if you contribute at least $2,400. If that money is withdrawn in the same year, you cannot claim the deduction (you can’t put the cash in then turn around and spend it immediately on tuition). However, expenses that qualify for the school tuition deduction can also be claimed as long as they’re not paid for by start contributions.


So, the way I read it, you can contribute $2400+/yr before your kids start school. Once you start having actual educational expenses, you claim the tuition deduction for any of those expenses that are NOT paid using start funds.

It gets a little weird when you withdraw funds from start and make a contribution in the same year - it appears you cannot claim the deduction if your withdrawal is more than your contribution for that year.

LDR information bulletin that addresses some of this