January 18, 2018 Hope Scibal

Congress just made it easier for you to pay tuition

How changes in 529 College Savings Plans can help elementary school families pay tuition today

Grymes is proud to offer Tuition Assistance and flexible, interest-free payment options to make the cost of tuition more accessible for any family

Congress just made paying independent school tuition at the elementary and secondary school levels more interesting, and this information couldn’t be more timely for parents who are considering enrolling (or re-enrolling) their children at Grymes. Tis the season, after all, when the Admissions Office is bustling with activity! Grymes is proud to offer Tuition Assistance and flexible, interest-free payment options to make the cost of tuition more accessible for any family; now changes in the tax code may provide further savings and even tax benefits for families who choose to invest in their children’s education with an independent school program.

How on earth can paying tuition be interesting, you might ask? Thanks to the newly passed tax code, 529 College Savings Plans are no longer just reserved for college tuition; they’re now applicable to K-12 tuition too, and that could mean considerable advantages for you.

Many of you may be scratching your heads wondering what a 529 Savings Plan is, and you would certainly not be alone. You may recall seeing this guy in Virginia529 television ads. In the ads, this “green monster” represents your child’s future college tuition, a monster that can be abated with a 529 Savings Plan.

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A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future college costs. * Forward-thinking parents can use a 529 Plan to put money away for college tuition down the road. Just like a savings account, the hope is that the funds tucked away in a 529 will grow over time through compounding interest. The difference, however, between a 529 Savings Plan and a regular savings account is that a 529 offers some interesting tax advantages. The money families put into a 529 each year is untaxed and grows free of tax. Further, since money added to a 529 Plan is pre-tax, payments towards a 529 Plan reduce a family’s annual taxable income. In other words, by putting money away each year into a 529 Plan to save for college, you lower your state income tax bill.

Even further, many states incentivize 529 savings by also allowing a tax deduction for families who contribute to their 529 Plan. According to virginia529.com, Virginia taxpayers investing in a 529 Plan may deduct up to $4,000 per account per year from their Virginia state individual income taxes. *

Up to $10,000 per year from 529 Plans can now be applied to elementary and secondary school tuition payments

While in the past, 529 Plans have only been applicable to college tuition, thanks to some legaleze that was tucked into the recent tax reform bill, up to $10,000 per year from 529 Plans can now be applied to elementary and secondary school tuition payments. This means parents who are paying tuition for independent elementary schools like Grymes may see some new savings and tax advantages if they use a 529 Plan to do so.

See? Interesting!
(Even more interesting, click here for a recent story from NPR about how this legislation sneaked up on many states, many of which were unaware of this change before the new tax code was passed.)

It may be worth your while to research and discuss the option of a 529 Savings Plan further with your financial advisor

While saving for the future is certainly a good idea for any family of young elementary school-aged children, it may be worth your while to research and discuss the option of a 529 Savings Plan further with your financial advisor to see what it could also mean for you in the short term. Thanks to the tax reform recently passed by Congress, 529 Savings Plans may help independent school families with tuition today while also keeping that big green monster at bay for the future.

 

Please be mindful that this article is not intended to serve as financial advice for readers. We simply hope to share some interesting information that we encourage families to research thoroughly and consider carefully with guidance from a financial advisor.

 

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