Catholic school parents may benefit from recent changes to the federal tax code which allows parents to make contributions to a child's
Missouri 529 MOST
account for K-12 tuition, in addition to expenses for higher education that are already permitted.
The
Missouri 529 MOST
account is an investment program sponsored by the Missouri State Treasurer's office. Anyone can open a MOST account, including parents, grandparents, or friends of K-12 or college-aged students. In this way, if parents lack financial resources, others can contribute to the family's MOST account.
Interest earnings on contributions made by parents to MOST accounts are
not
subject to state or federal taxes. Furthermore, qualified distributions from the account (those for higher education expenses, and now K-12 tuition) are also
not
taxed. Parents can withdraw up to $10,000 annually for private K-12 tuition per student as an eligible distribution from a MOST account. Parents can also elect to make contributions to the MOST account according to their own timetable, such as monthly.
Funds contributed to a MOST account are deducted from the parent's taxable income. For example, if a Catholic school parent contributes $5,000 during the year to their child's MOST account, $5,000 will be deducted from their taxable income for state purposes. Larger contributions to MOST accounts will further reduce taxable income.
Reducing taxable income, in turn, will reduce the state tax bill parents pay. (Other factors may affect the tax benefit realized, but this change in federal law will provide a real state tax benefit to Catholic school parents.) See the table below:
