10 Things: New Education Tax Breaks For A Child Or Grandchild
Published Friday, August 3, 2018 at: 7:00 AM EDT
1. If you have a child or grandchild, for the first time ever, you can now pay tuition for kindergarten through 12th grade at private, public or religious schools with money saved in tax-advantaged 529 college savings accounts.
2. Thanks to the Tax Cuts And Jobs Act (TCJA), you now can draw up to $10,000 tax-free per student from a 529 plan, which is a tax-advantaged program sponsored by states, state agencies, and educational institutions.
3. While your contributions to a 529 plan are not deductible, earnings grow free of federal income tax on withdrawals to pay for qualified school expenses.
4. You are not limited to 529 plans sponsored by your state. You can choose from a long list of 529s sponsored by other states and choose the right one for you. Call us if you want help with this.
5. A big relief is that the new law leaves the student loan interest deduction unchanged at $2,500. Some lawmakers wanted to scrap it, but the majority rallied to the tax break's defense. Americans owe some $1.48 trillion in student debt, and it's definitely a thing to watch.
6. When student loans are cancelled due to death or disability, they now become tax-exempt. Till now, the debt would be added to the income of a deceased or disabled individual. This new tax benefit is not retroactive, and only affects loans taken from 2018 through 2025. Congress may choose to extend this tax break.
7. The TCJA axes taxes on alimony payments, so custodial parents should have it easier qualifying for need-based aid. Their income won't be as high as what's reflected in tax records, which is what federal aid officials rely on to determine who to help and by how much.
8. Tax deductions for interest on home equity loans and lines of credit were eliminated. These are major sources of education funding, businesses, and a range of other expenses. It's gone.
9. The new federal levy on colleges with big endowments could result in still-higher tuition costs.
10. Education tax breaks were boosted overall by the TCJA, but you almost must be a financial professional to manage the complexities of funding the education of a child tax-efficiently and with low investment expenses.
This article was written by a veteran financial journalist. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation.
- August Retail Sales Indicate The Recovery Is Intact
- This Week’s Financial Economic News
- Latest Financial Economic News For Investors
- After Fed Inflation Policy Speech, Stocks Closed At New Record High
- Stocks Closed 1% Off All-Time High; Strong New Economic Data
- Stocks Broke Record High Again This Week
- U.S. Jobs Picture Improved, Covid Variant Risk Declined, And Stocks Closed Week At Record
- This Week’s Economic And Investment News
- Positive Earnings, Housing, and LEI News; Stocks Closed Week At A Record
- Today Versus Post-War History Of U.S Economic Cycles
- Stocks Surged 1.1% Today, Closing At A Record High For The Third Straight Week
- Strong Jobs Report Confirms Recovery
- What's Ahead For The Second Half Of 2021?
- Despite Strong Economic News, Stocks Dropped This Past Week
- Stocks Closed At A Record High; What's Expected For The Rest of 2021?
- Jobs Situation Report Pushes Stocks A Fraction From All Time High
- Inflation Rate Doubled In Past Two Months
- Fed Signals It's Thinking About Starting To Talk About Tightening
- Expect Inflation To Make Investors Nervous Through 2021
- Stocks Closed At A Record, Ignoring A Bad Jobs Report
- Stocks Soared 5.2% In April; Now, For The Good News
- A Window Of Opportunity Is About To Close
- Retail Sales, Housing Starts, And Stocks Rocket Higher
- The Fed Is Not Braking The Boom Anytime Soon