Well established and evolved over the years, 529 plans are tax-advantaged strategies designed to encourage saving for future education costs. Withdrawals from a 529 plan are excludable from income as long as the withdrawals are used to pay qualified educational expenses. New legislation covered under the SECURE Act expands that list of qualifying expenses to include costs associated with registered apprenticeships, homeschooling and private elementary, secondary or religious schools, as well as up to $10,000 of qualified student loan repayments.
The most notable expansion of the plan is that ability to use 529 funds to make student loan payments. The $10,000 is a lifetime limit, which applies to the 529 account beneficiary and each and any of their siblings. For example, a parent with four children may take a $10,000 distribution to pay loans for each child, totaling $40,000.
The added inclusion of apprenticeships covers expenses like fees, books, supplies and any other equipment required for participation in a qualified program that allows an individual to obtain paid work experience, classroom instruction and a portable credential. The expansion creates flexibility for parents of those children who elect an alternative to traditional higher education.
All these changes help address one of the biggest concerns for families looking to start a 529 plan, the worry that they’ll have funds leftover after the beneficiary graduates. The expansion of 529 rules made by the SECURE Act provides more options for families to distribute excess funds without incurring penalties.
Interested in learning more about the SECURE Act? Download the SECURE Act eBook from the Schneider Downs Retirement Solutions team for a full overview of provisions and highlights at www.schneiderdowns.com/secure-act-ebook.
Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.
