There are currently 30,861 private schools in the United States that serve 5.3 million PK-12 students. Now, many of the parents of these students may benefit from a provision tucked away inside the Republican Tax Reform plan.
The tax bill was recently signed by President Donald Trump, and it contained a provision that will allow parents of private school students to use the tax-free 529 Savings Plan. In short, families who want to send their children to private or religious schools can easily save money in 529 education savings accounts, which let parents avoid paying capital gains tax on money they put away for college. Now, those accounts can also be used for parents who want to send their children to private elementary, middle, or high schools. In the past, this savings plan only applied to college tuition.
In The New York Times, “Your Money” columnist Ron Lieber writes that “Yes, You Really Can Pay for Private School With 529 Plans Now.” Not only that, but “The short-term opportunities for affluent families are potentially worth five figures,” writes Lieber.
This tax provision could help many religious school districts around the country. According to WKBW, Sr. Carol Cimino, Superintendent of Catholic Schools in the Diocese of Buffalo, says that she is happy with the federal efforts, but finds herself upset with the fact that New York Governor Andrew Cuomo recently vetoed a reimbursement for Catholic schools that would give them back the money they used for state-mandated tasks. These tasks include conducting NYS mandated tests and collecting immunization records.
Superintendent Cimino says Cuomo’s veto means that the Buffalo-area Catholic schools would lose $750,000 annually. Dan Dolan, of the Nichols School Chief Financial Office, released a statement regarding the savings plan. However, the tax legislation could offer major benefits to private schools in New York and around the country. Now that parents can save money for private school tuition tax-free, private schools may be able to raise tuition.
“We certainly hope this could potentially help families save for education. We are always looking for ways to make a Nichols School education accessible to as many students as possible. Nichols is dedicated to attracting students from a broad range of economic backgrounds, and we currently offer financial assistance through several vehicles, including different payment plans and need-based financial aid,” Dolan said in the statement.
Now that President Trump has signed the bill, the changes should go into effect starting in 2018. However, it’s still unclear how these changes will affect private school parents in the long run, as some states may raise taxes on 529 users to offset these new tax changes.
In addition, some taxpayers are worried about how long the changes will last. For the time being, one thing is sure, big changes to educations savings are on the horizon.