The newly signed “Tax Cuts and Jobs Act” has some changes that could benefit private elementary and secondary schools.
Under pre-Act law, funds in a Code Section 529 college savings account could only be used for qualified higher education expenses. The new Law now includes tuition, at an elementary or secondary private or religious school as being “qualified higher education expenses”. So taxpayers can contribute dollars to a qualified 529 plan and the funds can grow tax free. If the dollars are used for the newly qualified tuition, after December 31, 2017, they then can come out of the 529 plan tax free as well.
The aforementioned, may not mean much to someone that does not have dollars to invest in a 529 plan. However, the Missouri 529 plan (Missouri MOST), has some additional benefit. If you are an account owner and Missouri resident, you can deduct, on your Missouri individual income tax return, up to $8,000 ($16,000 if your married filing joint) of your MOST 529 Plan contributions when you file your return. As example, an $8,000 contribution, with a Missouri tax rate of 6%, saves you $480 of Missouri taxes. Additionally, there is no time period the money has to be in the account for you to get this deduction. Accordingly, you could fund the account today and write a check for tuition tomorrow and you just saved 6% of the amount in Missouri taxes (up to the annual limits).
If you would like more information about this, or any other tax matter, please contact one of our professionals at 636.498.1900.