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Using 529 funds to pay private school tuition
Posted on 7/28/18 at 2:34 pm
Posted on 7/28/18 at 2:34 pm
Anyone thinking of doing this. My 529 funds are not fully funded by any means but I pay cash every year for private school tuition every year. Is there any benefit to pulling the funds from the 529 to pay tuition and then putting my cash into the 529? I think there are some tax breaks and matching funds from the state but I'm not sure I'm understanding this correctly. Anyone know the best way?
3
Posted on 7/29/18 at 7:33 pm to tigereye58
Bump. I’m in the same situation myself.
Posted on 7/29/18 at 7:48 pm to ds4ua1020
In the LA one you can get a match on your contribution amount. So passing the funds through can be beneficial.
Posted on 7/29/18 at 9:22 pm to eng08
Already did this. it was great to not have that monthly burden.
there are some differences in the federal and state 529s so you should check before withdrawing.
there are some differences in the federal and state 529s so you should check before withdrawing.
Posted on 7/30/18 at 7:55 am to tigereye58
Interested in this as well. Believe the law changed within the last couple years to allow paying for non-college tuition which is huge. Does anyone have experience withdrawing and paying for private school tuition using the 529?
Posted on 7/30/18 at 3:52 pm to tigereye58
Is this what they are referring to in the story LINK
Posted on 7/30/18 at 3:53 pm to eng08
quote:
In the LA one you can get a match on your contribution amount. So passing the funds through can be beneficial.
The LA START Plan is only allowing one 10K distribution, for 2018, for K-12. Beyond that, they are starting a new version of START just for K-12, and you can't use your "old" START account for K-12.
This new version of START K-12 doesn't have state tax deductions on contributions and doesn't have the earnings enhancement.
Posted on 7/30/18 at 4:10 pm to LSUFanHouston
Yes thats the story I’m referring to. It sounds like any money I pay out of my current START account would be tax deductible next year. I’m still really confused on this but it seems like its a 1 time thing for this year and our tuition is due in the next few days. Kind of late for them to clarify this on August 6th.
Posted on 7/30/18 at 4:25 pm to tigereye58
Sounds like this will be a benefit for those with funds on deposit prior to this year. You can withdraw up to 10k this year tax free for k-12 tuition.
Any future deposits into the new START K12 accounts do not exempt a portion of annual deposits from an account owner's taxable income and no state enhancements/contributions.
IS this the way to take advantage of this law change for this year only? I am assuming I could take out $4,800 from my "old" START account for this year's tuition per account (joint filer) and then deposit $4,800 into the same "old" START account (to be used for college later) and get the exemption from state taxes on the $4,800 and enhancement? Is that how you take advantage of this one time deal from the regular START account?
Any future deposits into the new START K12 accounts do not exempt a portion of annual deposits from an account owner's taxable income and no state enhancements/contributions.
IS this the way to take advantage of this law change for this year only? I am assuming I could take out $4,800 from my "old" START account for this year's tuition per account (joint filer) and then deposit $4,800 into the same "old" START account (to be used for college later) and get the exemption from state taxes on the $4,800 and enhancement? Is that how you take advantage of this one time deal from the regular START account?
This post was edited on 7/30/18 at 4:35 pm
Posted on 7/30/18 at 4:43 pm to fatboydave
quote:
S this the way to take advantage of this law change for this year only? I am assuming I could take out $4,800 from my "old" START account for this year's tuition per account (joint filer) and then deposit $4,800 into the same "old" START account (to be used for college later) and get the exemption from state taxes on the $4,800 and enhancement? Is that how you take advantage of this one time deal from the regular START account?
Based upon the law and the rules, this would seem to work... just remember that you are essentially not making a contribution to college expenses for this year.
Posted on 7/30/18 at 4:44 pm to tigereye58
You can take out up to 10K of a current plan, for the current beneficiary, today. No need to wait on this. The form is on the START website.
The money you take out isn't tax deductible, it's just not included in taxable income for 2018.
The money you take out isn't tax deductible, it's just not included in taxable income for 2018.
Posted on 7/30/18 at 4:58 pm to LSUFanHouston
quote:
Based upon the law and the rules, this would seem to work... just remember that you are essentially not making a contribution to college expenses for this year.
I'm not following the "you are not making a contribution to the college fund this year" statement.
I am planning to take the $4800 out and put it back (plus other contributions)in this year. I just want to max the state deduction (not included in income) of $4800 per account this one time.
This post was edited on 7/30/18 at 4:59 pm
Posted on 7/30/18 at 5:44 pm to LSUFanHouston
quote:
This new version of START K-12 doesn't have state tax deductions on contributions and doesn't have the earnings enhancement.
So, it's basically pointless?
Posted on 7/30/18 at 7:14 pm to Y.A. Tittle
quote:
So, it's basically pointless?
It seems like the only benefit is the gains are tax free if used for tuition.
Posted on 7/30/18 at 9:11 pm to fatboydave
I was told the tax free benefits are essentially gone.
Posted on 7/30/18 at 9:37 pm to fatboydave
quote:
I'm not following the "you are not making a contribution to the college fund this year" statement.
I am planning to take the $4800 out and put it back (plus other contributions)in this year. I just want to max the state deduction (not included in income) of $4800 per account this one time.
Jan 1 you have $24,800 in the account
Aug 1 you pull out $4,800, you now have $20,000 (assuming no investment growth)
Aug 2 you contribute $4,800, you now have $24,800 in account, and again for ease of simplity, we assume no investment gains until Dec 31. So you end the year same place you started, as far as how much money is set aside for college.
Posted on 7/30/18 at 9:43 pm to Y.A. Tittle
quote:
So, it's basically pointless?
No, as you still get to save money in it with tax deferred and ultimately tax free growth.
It's a good "grandma and grandpa" plan. Kid is born, and every year, grandma and grandpa put $10,00 into the account. After 5 years, or when the kid is ready to hit Kindergarten, there is $50,000, plus investment gains, in the account.
It's a good way to pre-fund K-12 education expenses with an inflation hedge (assuming your rate of return is greater than the rate of tuition inflation).
It can also be a pretty good estate planning tool, as part of a plan of gifting.
But keep in mind that you can already write off $5,000 a year in tuition and fees on your LA return.
This is a pretty interesting tool for those who have the luxury of generational wealth. But for the rank and file Catholic school parent who finances their annual tuition payments, this really doesn't do much at all.
Posted on 7/31/18 at 8:27 am to LSUFanHouston
quote:
Kind of late for them to clarify this on August 6th.
I thought the same thing when I saw this article in The Advocate the other day. It's almost like Foil's team realized they never did a press release on the bill they helped pass.
Also, the article is yet another reason to hate The Advocate and their shitty reporting quality. Will Sentell literally copy/pasted his notes from the phone call to make this article.
There's a whole lot of questions and actions you'd need to do if you needed to fund an account and then almost immediately withdraw it for a full tuition payment.
While I have the original LA Start 529 plans for both kids, luckily they are both under 3, so no need for me to do anything with it this year.
The best plan of action seems to get the grandparents to start funding these for the kids.
This post was edited on 7/31/18 at 8:31 am
Posted on 7/31/18 at 10:16 am to LSUFanHouston
quote:
This new version of START K-12 doesn't have state tax deductions on contributions and doesn't have the earnings enhancement.
I figured that's where this would go. It had to be. Louisiana's budget couldn't support the massive increase in use of the START program as it was, for the K-12 private school tuition.
Posted on 7/31/18 at 11:17 am to lnomm34
quote:
I figured that's where this would go. It had to be. Louisiana's budget couldn't support the massive increase in use of the START program as it was, for the K-12 private school tuition.
Yeah, that's part of it... however the "official reason" was that new deductions can't be passed in a regular session in even number years (i.e. this year's non-fiscal session).
Of course... if the powers that be wanted it, they could have asked JBE to handle it in one of the many special sessions this year.
Now that the fiscal issue is "solved" according to the politicians, I'm curious if they will try to add deductions next year in session.
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