Closing the Gap for Private School EducationSubmitted by Prosperity Advisory Group on June 19th, 2018
Parents that make the personal decision to send their children to private schools know of the incredible investment it requires. The average cost of private schools is $13,000, yet the programs that have been available in the past haven’t made a dent in the amount of money it costs to invest in private education.
If you have made the decision to choose private education for your children, you may have had to use Coverdell Education Savings Accounts (ESAs) to try to fund tuition costs. Coverdell ESAs allow you to save some money tax-free for your children’s K-12 education. However, you are limited to saving $2,000 per year per child. As the cost of private education continues to climb, you may feel overwhelmed when you fall short of covering the costs of private education with this contribution limit in the books.
According to the SEC, “A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs.” This only gives tax advantages to parents saving for future college expenses- not for parents paying for K-12 private education. These “qualified tuition plans” have been popular for post-secondary education because they have much higher contribution limits than the $2,000 cap on the Coverdell ESAs. Some states even offer a state tax deduction or credit for 529 plan contributions.
Fast-forward to today, and there is light at the end of the tunnel for K-12 private school parents in their fight for tax-free incentives. The final GOP tax bill has offered some new advantages for private education. In the past, these 529 plans were only to be used for qualified college education expenses. With this new bill, taxpayers can pay for up to $10,000 per year of private school education tuition, from kindergarten all the way to college, with a 529 plan.
Talk about closing the gap!
Some states have already conformed to the new federal tax law. Be sure to check if your state recognizes K-12 private school education tuition as a qualified expense.
To learn more about ESAs, 529 plans and other ways to invest now to pay for private education, contact Prosperity Advisory Group so we can assist you on your financial journey to confidence.