This weekend, the conference report was filed for Congress’ Tax Cuts and Jobs Act. Under the agreement reached between the U.S. House of Representatives and U.S. Senate, the typical family of four, earning $73,000 per year, will get a $2,059 tax cut next year.
The Tax Cuts and Jobs Act nearly doubles the standard deduction to simplify taxes and make more of what you earn tax-free. It doubles the child tax credit to $2,000 per child and lowers tax rates across the board.
There are two particular provisions in this conference report that I would like to bring to your attention because they apply to 529 college savings plans:
1. The final version of the Tax Cuts and Jobs Act will allow use of your 529 college savings for costs associated with enrollment or attendance at a public, private, or religious elementary or secondary school. No more than $10,000 during a tax year may be withdrawn for this purpose, without incurring any tax penalties. This limit applies to the beneficiary, or student, and not to the account. So, even if you have multiple accounts for your child, you will still be limited to $10,000 total in tax-free distributions for that child in any given tax year. This provision of the new tax reform bill applies to distributions made after December 31, 2017.
2. The final version will also expand the definition of qualified expenses to include certain expenses incurred in connection with homeschooling. These are:
(a) Curriculum and curricular materials,
(b) Books and other instructional materials,
(c) Online educational materials,
(d) Tuition for tutoring or educational classes outside of the home – but only if the tutor or
instructor is not related to the student,
(e) Dual enrollment in an institution of higher learning, and
(f) Educational therapies for students with disabilities.
This provision also applies to distributions made after December 31, 2017.
We will be working to get more information to our MACS and MPACT customers about these provisions in the coming weeks.
The House is expected to vote on the Tax Cuts and Jobs Act today. The Senate is expected to vote on it tomorrow. As a conference report there are no further opportunities for amendment, so if passed in both chambers this bill will go to the President, who has indicated he will sign it into law.