As you may be aware, the recently enacted federal tax legislation contains a provision which the Orthodox Union Advocacy Center promoted and can be utilized to help our community’s parents with their tuition obligations.
For many years, “529 Accounts” have been available for parents to save for college expenses in a tax advantaged way. Parents, grandparents, or other guardians have been able to deposit post-tax funds into an account for each child. Those funds are invested by the account managers in mutual fund portfolios. The gains accrued to the account are tax free. Additionally, most states provide a deduction on the state income taxes of a donor to a 529 Account.
The size of the state tax deduction varies state by state. For example, New York provides a state tax deduction of up to a total of $10,000 per year for donations to 529 Accounts, while Maryland provides a state tax deduction of up to $2500 per child per year for donations to 529 Accounts, and New Jersey is one of the few states that provides no state tax deduction for 529 contributions.
The newly enacted federal tax law expands the eligible use of funds from 529 Accounts from being only for college expenses to include K-12 expenses — including parochial and private school tuition.
Day school parents should consider opening 529 Accounts for each of their children in January, 2018. Of course, you should consult with your personal accountant or financial adviser with regard to your individual circumstances. But with the expansion provided by the new tax law, there are ways for day school parents to benefit.
The greatest financial benefit derived from 529 Accounts is reached by depositing funds as early as possible and allowing them to accrue tax free gains over a period of years. Depositing funds in the early years of a child’s life can lead to substantial gains by the time that child reaches middle or high- school age. Parents might also be able to benefit from the state tax deduction for 529 account deposits on a shorter term basis; you should consult with your financial adviser to explore other options.
OU Advocacy and its affiliated TEACH Network is exploring ways to work in Albany, Trenton, Annapolis and other state capitals to increase the value of this contribution deduction and thus benefit our community more. (We will be in further touch about those plans and how you can join the effort in the coming weeks.)
Most of the states where our communities are located provide 529 Accounts with state income tax deductions. They maintain websites with a great deal of helpful information and we urge you to review the details there, in consultation with your financial adviser.
New York https://www.nysaves.org/home.html
New Jersey https://www.njbest.com/
Pennsylvania http://pa529.com/
Maryland https://maryland529.com/
Florida http://www.myfloridaprepaid.com/