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How Does the New Tax Plan Change 529 Accounts?

Piggy banks on books

On December 22, 2017, a wide-ranging tax reform bill (H.R. 1) was signed into law.  The new law is complex and impacts many areas of income, deductions and credits.  Both 529 college savings and ABLE disability savings programs received attention in the tax bill, with enhancements and added flexibility added to both types of programs. Virginia529 is currently reviewing the changes and how they may affect our programs and our customers.  Check back periodically as FAQ’s are updated and other relevant information is shared as soon as practicable.   

What is known about the changes related to 529 college savings programs:

  • transfers from a 529 college savings account to an ABLE account will be considered a qualified distribution after January 1, providing flexibility for parents to move between programs to best fit their needs
  • account owners now will be able to use their 529 accounts, should they choose to do so, for certain public, private or religious K-12 tuition costs, up to $10,000 per child per year.  Rules and definitions are still being determined.  It appears this applies prospectively only, for costs incurred in or after 2018    

In addition, although many education related deductions and credits were in play throughout tax bill negotiations, most of the education related deductions and credits remain relatively intact in the final bill, including the American Opportunity Tax Credit (AOTC), student loan deductions, exemption of tuition fee waivers from taxable income and similar provisions.  Many resource will be available for information on all aspects of HR 1 and we will be supplementing our information periodically.    

Please do not hesitate to contact Virginia529 toll-free at 1-888-567-0540, option 3, if you have any questions.

Read more about the Tax Cuts and Jobs Act’s impact on 529 savings plans at Savingforcollege.com


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Resources to help you learn

Virginia529 offers free, in-person information sessions at locations across Virginia. These hour-long sessions highlight the program’s three plans, explain the benefits to account owners and give you the chance to get your questions answered. If you don’t live near one of our in-person sessions, Virginia529 offers online webinars where you can learn more from the comfort of your own home.